PELIC1 
MILK 


••:.;;y:;.;" 


THE  PRICE  OF  MILK 


THE 
PRICE  OF  MILK 


By 

CLYDE  L.  KING,  Ph.D. 

WHARTON  SCHOOL  OF  COMMERCE  AND  FINANCE 
UNIVERSITY  OF  PENNSYLVANIA 

Formerly 

CHAIRMAN,  GOVERNORS'  TRI-STATE  MILK  COMMISSION 
(Pennsylvania,  Maryland  and  Delaware) 

FEDERAL  MILK  COMMISSIONER  FOR  THE  EASTERN  STATES 
MILK  PRICE  ARBITRATOR  FOR  THE  STATE  OF  PENNSYLVANIA 


WITH 

MAPS,  CHARTS  AND  DIAGRAMS 


PHILADELPHIA 

THE   JOHN    C.   WINSTON    COMPANY 
PUBLISHERS 


Copyright,  1920,  by 
THE  JOHN  C.  WINSTON  COMPANY 


All  Rights  Reserved 


BOP 

THE  JOHN  C.  WINSTON  COMPANY 

PHILADELPHIA.  PA.,  V.  8.  A  . 


FRANK  P.  WILLITS 
W.  S.  WISE 
A.  W.  PLACE 
Milk  Producers 


THIS  BOOK 

is 
DEDICATED  TO 

HENRY  WOOLMAN 
E.  M.  BAILEY 
JOHN  LEFEBRE 
Milk  Dealers 


HERBERT  HOOVER 
HOWARD  HEINZ 
JAY  COOKE 

Public  Officials 


427477 


CONTENTS 

PART  I 
THE  PRICE  OF  MILK  TO  THE  PRODUCER 

CHAPTER  PAGE 

I.  THE  PUBLIC  INTEREST  IN  THE  PRICE  OF 
MILK 15 

II.  THE  FORCES  THAT  Fix  THE  PRICE  OF 

MILK 35 

III.  MANUFACTURED    MILK    PRODUCTS    IN 

THEIR  RELATION  TO  PRICE 51 

IV.  THE     PRICE     INTERDEPENDENCE     OF 

LOCAL,  PRIMARY  AND  INTERNATIONAL 
MARKETS 85 

V.  THE  COST  OF  PRODUCTION 104 

VI.  SHOULD  DAIRYMEN  ORGANIZE  FOR  COL- 
LECTIVE BARGAINING? 130 

VII.  POLICIES  OF  DAIRYMEN'S  ORGANIZATIONS 

IN  THEIR  RELATION  TO  PRICE 142 

PART  II 
THE  COST  OF  DISTRIBUTING  MILK 

VIII.  THE  COST  OF  MILK  DISTRIBUTION  ....  175 

IX.  SANITARY  REQUIREMENTS  IN  THEIR  RE- 
LATION TO  PRICE 193 

7 


CONTENTS 

CHAPTER  PAGE 

APPENDIX:  LEGAL  STANDARDS  FOR  DAIRY 
PRODUCTS 223 

GEORGE  B.  TAYLOR  AND  HARRY  N.  THOMAS, 
MARKET  MILK  SPECIALISTS,  UNITED  STATES 
DEPARTMENT  OF  AGRICULTURE. 

X.  How  SHALL  MILK  BE  DISTRIBUTED?  . .  237 

XL  CAN   MILK    DISTRIBUTION    COSTS  BE 

LOWERED? 251 

XII.  THE  PUBLIC  INTEREST  IN  MILK  DISTRI- 
BUTION.   274 

PART  III 
FAIR  PRICE  POLICIES 

XIII.  THE  FOOD  VALUE  OF  WHOLESOME  MILK  293 

XIV.  COOPERATION  AND  PRICE 313 

XV.  FAIR  PRICE  POLICIES.  .  .  324 


MAPS  AND  CHARTS 

PAGE 

I.  PER  CAPITA  CONSUMPTION  OF  MEAT  IN  DIFFERENT 
COUNTRIES 23 

II.  RECEIPTS  FROM  SALES  OF  DAIRY  PRODUCTS,  1909...     26 

III.  MILK  Cows  IN  THE  UNITED  STATES  PER  1,000  POPU- 

LATION, 1840-1918 27 

IV.  THE  RELATIVE  INCREASE  IN  WHOLESALE  PRICES  FOR 

MILK,  BUTTER,  AND  MILK  Cows,  AND  FOR  CORN, 
COTTONSEED  MEAL,  HAY,  AND  LABOR  IN  THE 
UNITED  STATES,  1910-1920 32 

V.  USES  TO  WHICH  THE  TOTAL  MILK  PRODUCED  IN  THE 

UNITED  STATES  is  PUT 38 

VI.  PROPORTION  OF  TOTAL  MILK  SOLIDS  PRODUCED  IN 
THE  UNITED  STATES  IN  1917  GOING  INTO  THE 
DIFFERENT  MILK  PRODUCTS 39 

VII.  THE  PRICE  OF  BUTTER  AND  OLEOMARGARIN  PER 
POUND,  1913-1920,  AND  THE  PRODUCTION  OF  OLEO- 
MARGARIN IN  MILLIONS  OF  POUNDS,  1917-1920. . .  47 

VIII.  THE  RECEIVING  STATION  SUPPLY  AND  THE  CON- 
SUMER'S DEMAND  FOR  WHOLE  MILK  FOR  ONE 
MILK  DISTRIBUTOR,  1915-1917 54 

IX.  AVERAGE  MONTHLY  WHOLESALE  PRICES  OF  BUTTER 

AND  CHEESE,  1913-1919 70 

X.  COLD  STORAGE  HOLDINGS  OF  CREAMERY  BUTTER  BY 

MONTHS  FOR  STATED  PERIODS 72 

XI.  THE  RELATION  OF  PRICES  TO  PRODUCTION,  EXPORTS 
AND  STORAGE  STOCKS  OF  BUTTER,  OF  CHEESE  AND 
OF  CONDENSED  MILK  AND  EVAPORATED  MILK  ....  79 

THE  PRE-WAR  DISTRIBUTION  OF  MILK  Cows  IN  FIVE 

EUROPEAN  COUNTRIES Facing    86 

9 


MAPS  AND  CHARTS 

PAGE 

XII.  BALANCE  OF  TRADE   IN  DAIRY   PRODUCTS,   UNITED 

STATES,  1913-1919 90 

DISTRIBUTION  OF  DAIRY  Cows  IN  THE  UNITED  STATES, 
1919 Facing    94 

XIII.  FARM   AND   FACTORY   BUTTER   PRODUCTION   IN  THE 

UNITED  STATES  SINCE  1850 132 

XIV.  FARM   AND   FACTORY   CHEESE   PRODUCTION   IN  THE 

UNITED  STATES  SINCE  1850 133 

XV.  THE  AVERAGE  MONTHLY  VARIATION  IN  THE  AVERAGE 
ANNUAL  PRICE  RECEIVED  BY  MILK  PRODUCERS  IN 
THE  NEW  YORK,  PHILADELPHIA,  PITTSBURGH,  AND 
CHICAGO  MILK  MARKET  DISTRICTS  FOR  THE  TEN- 
YEAR  PERIOD  ENDING  IN  1916 152 

XVI.  THE  PRICE  RECEIVED  BY  MILK  PRODUCERS  AT 
COUNTRY  RECEIVING  STATIONS  DURING  1918  IN 
THE  NEW  YORK,  PHILADELPHIA,  PITTSBURGH,  AND 
CHICAGO  PRIMARY  MARKET  DISTRICTS 154 

XVII.  PRICE  PAID  FOR  MILK  AT  COUNTRY  RECEIVING 
STATIONS  IN  THE  NEW  YORK,  PHILADELPHIA,  PITTS- 
BURGH, AND  CHICAGO  PRIMARY  MARKET  DISTRICTS, 
JANUARY  1,  1919,  TO  JUNE,  1920 156 

XVIII.  THE  RELATIVE  INCREASE  IN  THE  PRICE  OF  ALL  COM- 
MODITIES IN  THE  UNITED  STATES  AND  THE  INCREASE 
IN  THE  PRICE  OF  MILK  TO  PRODUCERS  AND  TO 
CONSUMERS  AND  THE  SPREAD  TO  DEALERS  IN  THE 
PITTSBURGH  DISTRICT,  JANUARY,  1913,  TO  JUNE, 
1920;  JULY,  1913,  TO  JUNE,  1914  =  100 254 

XIX.  DECLINING  UNIT  COSTS  WITH  INCREASING  VOLUME 
IN  THE  RECEIVING  STATIONS  OF  A  LARGE  MILK 
COMPANY..  268 


10 


ACKNOWLEDGMENTS 

This  book  is  the  outgrowth  of  the  studies  inci- 
dent to  the  author's  duties  as  chairman  of  the 
Governors'  Tri-State  Milk  Commission  (Pennsyl- 
vania, Maryland  and  Delaware),  as  Federal  Milk 
Commissioner  for  the  Eastern  States  in  the  Food 
Administration  and  as  price  mediator  in  monthly 
milk  price  conferences,  particularly  in  the  Phila- 
delphia, Pittsburgh  and  Baltimore  Districts.  In 
these  conferences  the  interests  of  those  who  sell  and 
those  who  buy  and  those  who  consume  milk  have 
found  expression  in  price.  Prices  therein  agreed  to 
have  had  far-reaching  consequences  to  the  welfare  of 
many  thousands  of  producers  and  several  million  con- 
sumers and  to  the  business  security  of  many  milk 
distributors  and  manufacturers.  Errors  in  price 
judgment  quickly  revealed  themselves  and  returned 
to  plague  their  authors  at  the  next  conference. 

It  is  difficult  to  choose  the  names  that  should  have 
special  mention  because  of  aid  given  the  author  in 
the  preparation  of  the  manuscript.  Among  these 
are  Frank  P.  Willits,  Robert  Balderston,  H.  D.  Alle- 
bach,  Fredrick  Shangle,  A.W.  Place,  W.S.  Wise,  T.  S. 
Brenneman,  D.  G.  Harry,  and  I.  W.  Heaps,  milk  pro- 
ducers; E.  M.  Bailey,  Henry  Woolman,  Harry  Scott, 
Thomas  Harbison,  Henry  Dolfinger,  C.  R.  Lind- 
back,  Asa  B.  Gardiner,  C.  R.  Bowman,  J.  D. 
Stark,  Irvin  D.  Baxter,  milk  dealers;  Mrs.  Nevada 
D.  Hitchcock,  Mrs.  H.  C.  Boden,  Mrs.  Joseph 

11 


ACKNOWLEDGMENTS 

Heckman  and  Mrs.  W.  R.  C.  Wood,  milk  consumers; 
and  among  representatives  of  the  public  have  been 
Herbert  Hoover,  Howard  Heinz  and  Jay  Cooke, 
Food  Administrators;  Fred  Rasmussen,  now  Secre- 
tary of  Agriculture,  and  Hon.  Frank  B.  McClain, 
now  Director  of  the  Department  of  Public  Welfare, 
in  the  State  of  Pennsylvania. 

Acknowledgment  is  due  to  the  members  of  the 
Governor's  Tri-State  Milk  Commission,  particularly 
to  C.  Henderson  Supplee  and  Clarence  Sears  Kates. 
The  author  is  but  one  of  many  who  are  indebted  to 
the  shrewd  business  ability  and  fair  judgments  of 
M.  T.  Phillips,  of  the  Guernsey  Breeders'  Association. 
To  W.  L.  McGee,  an  accountant  of  ability,  expert  in 
milk  matters,  the  author  is  indebted  for  assistance 
that  is  as  sound  in  judgment  as  it  is  mathematically 
accurate. 

Mr.  Robert  W.  Balderston  and  Mr.  Henry  Wool- 
man  were  asked  to  read  the  proof.  Dr.  H.  W. 
Dodds,  now  Secretary  of  the  National  Municipal 
League,  and  Miss  Viva  Boothe  helped  in  the  prepa- 
ration of  the  manuscript. 

The  price  of  no  other  commodity  represents  so 
much  for  good  or  ill  to  public  and  individual  welfare 
as  does  the  price  for  milk.  The  author  sends  this 
book  out  with  the  hope  that  it  may  here  and  there 
be  helpful  in  a  modest  way  to  mutual  understanding 
and  cooperative  effort  in  keeping  wholesome  all  the 
factors  that  make  for  a  fair  milk  price. 


12 


PART  I 
The  Price  of  Milk  to  the  Producer 


CHAPTER   I 
The  Public  Interest  in  the  Price  of  Milk 

Milk  is  the  essential  element  in  the  diet  of  civ- 
ilized peoples. 

It  is  estimated  that  during  the  year  1917  the 
American  people  drank  SGjSOOjOOO^OO1  pounds, 
or  18,250,000  tons,  or  2,000,000  carloads  of  whole 
milk.  This  was  43.1  per  cent  of  the  84,611,350,000 
pounds  produced  in  the  United  States  in  that  year. 
In  round  numbers  the  forty-five  millions  of  our 
people  who  dwell  in  cities  drank  approximately 
31,500,000  pounds  daily,  in  comparison  with  45,- 
000,000  pounds  consumed  each  day  by  the  thirty 
million  persons  who  live  on  farms  having  dairy 
cows  and  25,000,000  pounds  consumed  by  the 
twenty-five  millions  who  live  in  small  towns  or  on 
farms  without  dairy  cows.  This  is  an  average  daily 
consumption  of  two-thirds  of  a  pint  by  persons  who 
dwell  in  cities.  The  average  consumption  of  those 
who  live  on  farms  having  dairy  cattle  is  one  and 
one-half  pints  per  day,  and  of  those  who  live  in 
small  towns  or  on  farms  without  dairy  cows  one 
pint  per  day. 

Vast  as  this  consumption  is,  it  is  not  as  large  in 
many  families  as  dietitians  say  it  should  be  for  whole- 
some nutrition.  To  give  to  all  the  one  pint  per  day, 

*This  is  the  estimate  given  by  the  United  States  Department  of  Agriculture 
in  Circular  No.  85,  issued  January  31,  1918,  p.  15. 

15 


THE  PRICE  OF  MILK 

which  Professor  H.  C.  Sherman  has  said  is  the 
minimum  necessary  to  maintain  health,  the  resi- 
dents of  our  cities  would  have  to  consume  one- 
third  more  milk  than  they  do  now.  Expansion  far 
beyond  this  would  be  necessary  to  meet  the  standard 
of  a  quart  a  day  which  Professor  Sherman  says  is 
a  good  rule  to  remember.  Professor  Graham  Lusk 
writes:  "No  family  of  five  should  buy  meat  until 
they  have  bought  at  least  three  quarts  of  milk." 
If  such  are  to  become  our  consumption  standards, 
our  production  will  have  to  be  greatly  increased. 

Professor  E.  V.  McCollum,  the  outstanding 
nutrition  expert  of  the  day,  says  as  to  the  need  for 
our  increased  use  of  milk  as  a  food  r1 

There  is  no  substitute  for  milk,  and  its  use  should 
be  distinctly  increased  instead  of  diminished,  re- 
gardless of  cost.  Every  possible  means  should  be 
employed  to  reduce  the  cost  of  distribution.  The 
necessity  for  the  liberal  use  of  milk  and  its  products 
both  in  the  diets  of  children  and  adults  should  be 
emphasized  in  order  to  stem  the  ebbing  tide  of  its 
production.  It  has  been  pointed  out  that  the 
value  of  milk  as  a  food  cannot  be  estimated  on  the 
basis  of  its  contents  of  protein  and  energy.  Even 
when  measured  by  this  standard  it  compares  most 
favorably  with  other  foods,  but  it  has  a  value  as  a 
protective  food  in  improving  the  quality  of  the 
diet,  which  can  be  estimated  only  in  terms  of 
health  and  efficiency. 

An  examination  of  any  large  groups  of  people 
in  the  cities,  will  show  that  where  there  is  a  high 
mortality  from  tuberculosis,  milk  is  not  being 


1  McCollum,  "The  Newer  Knowledge  of  Nutrition".     MaoMillan,  1919,  pp. 
152  and  153. 

16 


PUBLIC  INTEREST  IN  THE  PRICE  OF  MILK 

used  to  any  great  extent,  and  in  any  large  group 
where  milk  purchases  are  large  this  disease  is  not 
a  menace.  It  is  well  known  that  in  institutions 
where  tuberculosis  is  sucessfully  treated  milk  forms 
the  principal  article  of  the  diet  of  the  inmates. 
This  has  resulted  from  clinical  experience.  There 
is  no  other  effective  treatment  for  this  disease 
than  that  of  providing  fresh  air,  insisting  upon  rest 
and  heightening  the  body's  powers  of  resistance 
through  the  liberal  use  of  milk  for  the  correction 
of  faults  the  diet  will  inevitably  have  when  it  con- 
sists too  largely  of  seed  products,  tubers,  roots  and 
meats.  The  importance  of  diets  of  this  character 
in  the  etiology  of  tuberculosis,  has  not  hitherto 
been  appreciated.  In  the  light  of  facts  presented 
in  the  previous  chapters  of  this  book,  there  can  be 
no  reasonable  doubt  that  the  importance  of  poor 
hygienic  conditions  and  of  poor  ventilation  have 
been  greatly  over-estimated,  and  that  of  poor  diet 
not  at  all  adequately  appreciated  as  factors  in 
promoting  the  spread  of  this  disease.  Milk  is 
just  as  necessary  in  the  diet  of  the  adult  as  in  that 
of  the  growing  child.  Any  diet  which  will  not 
support  normal  development  in  the  young  will 
not  support  optimum  well-being  in  the  adult. 
Milk  is  our  greatest  protective  food,  and  its  use 
must  be  increased.  The  price  must  be  allowed  to 
go  up  as  long  as  the  cost  of  production  makes  it 
necessary,  and  up  so  far  as  is  essential  to  make 
milk  production  a  profitable  business.  Unless  this 
is  done,  the  effects  will  soon  become  apparent  in  a 
lowering  of  our  standards  of  health  and  efficiency. 

There  is  a  substantial  reason  for  this  large  con- 
sumption of  milk  as  well  as  for  the  insistence  of 
nutrition  experts  that  it  should  be  further  increased. 

2  17 


THE  PRICE  OF  MILK 

Such  national  food  habits  do  not  grow  up  without 
a  cause. 

The  reason  for  the  consumption  and  for  these 
recommendations  to  increase  consumption  can  be 
stated  in  a  sentence :  Milk  is  one  of  the  cheapest  and 
is  the  most  wholesome  of  foods  because  it  is  both  a 
"  protective "  food  and  a  food  easily  assimilable  for 
use  by  bone  and  muscle.  Dietitians  chorus  the  call 
to  use  more  milk  because  it  contains  certain  elements 
that  are  essential  to  sound  nutrition  and  to  the 
preservation  of  vitality  and  health,  in  addition  to 
its  value  as  sources  of  protein  and  energy.  In 
Chapter  XIII  essential  facts  as  to  the  elements  that 
make  milk  the  outstanding  protective  food  will  be 
further  discussed. 

But  the  large  consumption  of  milk  in  the  United 
States  preceded  the  definite  discoveries  of  these 
protective  food  elements.  In  part  this  consumption 
can  be  attributed  to  an  instinctive  knowledge  that 
milk-fed  humans  fare  better  than  those  not  milk 
fed.  Many  a  farmer  had  noted  the  difference  be- 
tween the  calves  or  the  pigs  that  did  and  those  that 
did  not  get  milk  in  their  diet.  And  mothers  knew 
from  folk  lore  and  from  their  own  observations  that 
milk  was  the  best  food  for  growing  children. 

All  consumers  have  had  before  them  daily  proof 
from  the  market  that  milk  was  one  of  the  cheapest 
of  animal  foods.  That  knowledge  was  not  expressed 
as  exactly  as  it  can  be  now;  but  it  was  known,  and 
is  now  known  and  roughly  measured  by  the  house- 
wife who  chooses  what  she  buys  or  decides  what 

18 


PUBLIC  INTEREST  IN  THE  PRICE  OF  MILK 

food  she  sells.  The  farm  wife  has  not  known  pre- 
cisely that  one  quart  of  milk  is  equal  to  4.3  eggs  as 
a  source  of  protein  and  to  8.5  eggs  or  a  pound  of  lean 
meat  as  a  source  of  energy,  as  scientists  have  found 
that  it  is;  but  she  has  long  preferred  milk  as  a  food 
for  her  children,  and  has  sold  the  eggs.  The  city 
housewife  has  not  known  the  precise  fact  that  milk 
at  16  cents  a  quart  is  as  cheap  a  source  of  proteins 
as  sirloin  steak  would  be  at  35.4  cents  a  pound,  or  as 
eggs  would  be  at  45  cents  a  dozen.  And  she  has 
likewise  been  scientifically  ignorant  of  the  extent  to 
which  milk  is  valuable  because  of  its  mineral  con- 
tent. Although  she  has,  therefore,  been  unwilling 
to  buy  as  much  milk  as  the  facts  would  warrant, 
nevertheless  the  total  consumption  of  city  dwellers 
shows  that  the  city  housewife  has  to  an  extent 
selected  the  better  and  cheaper  food.  Comparative 
food  values  have  not  been  the  sole  guide  with  either 
the  country  or  the  city  housewife.  Ease  of  marketing 
eggs  as  compared  with  milk  has  helped  the  country 
wife  make  her  decision,  while  the  fact  that  her 
family  prefers  to  chew  solid  food,  regardless  of  its 
actual  protein  or  energy  content,  has  helped  to  deter 
the  city  housewife  from  buying  solely  on  an  exact 
food-worth  basis. 

From  the  viewpoint  of  natural  welfare  it  is  of 
serious  importance  that  our  city  earners  buy  foods 
which  will  yield  them  their  full  money's  worth.  The 
days  of  national  isolation  were  numbered  with  the 
incoming  of  rapid  steam  transportation,  and  they 
passed  when  the  cable  and  the  wireless  made  it 

19 


THE  PRICE  OF  MILK 


possible  for  nations  to  compete  in  prices  for  the  out- 
put of  their  factories  as  well  as  for  the  products  of 
the  farms,  the  seas  and  the  mines.  Our  high  stand- 
ards of  living  can  be  kept  up  without  fear  of  ruinous 
competition  in  international  trade  only  if  we  choose 
for  our  diet  those  foods  that  give  the  best  nutrition 
for  the  least  price.  Among  such  foods  dairy  products 
easily  take  first  place.  The  dairy  cow  is  an  econ- 
omical producer  of  animal  food.  For  turning  inedible 
into  edible  human  foods  the  dairy  cow  acknowledges 
the  farm  pig  as  her  only  near  competitor,  and  in  the 
long  run  she  leisurely  leads  the  pig.  In  a  short  race 
the  pig  beats  the  cow  only  because  of  the  longer 
period  necessary  for  the  cow  to  mature. 

The  amount  of  edible  solids  produced  for  each  100 
pounds  of  digestible  organic  matter  consumed  by 
different  farm  animals  is  as  follows:1 


Animal. 

Edible  Solids 
Produced 
(pounds). 

Animal. 

Edible  Solids 
Produced 
(pounds). 

Cow  (milk)  

18.0 

Poultry  (eggs)  

5.1 

Pig  (dressed)                

15  6 

Poultry  (dressed)  

4.2 

Cow  (cheese) 

9  4 

Lamb  (dressed) 

3  2 

Calf  (dressed)              

8  1 

Steer  (dressed)  

2.8 

Cow  (butter) 

5  4 

Sheep  (dressed)       .         

2.6 

Herein  lies  the  reason  why  Mr.  Hoover  emphasized 
hog  production  during  the  war  period.  The  pro- 
duction of  hogs  can  expand  quickly  to  meet  war 
needs  without  as  serious  consequences  in  the  sudden 
contraction  that  may  follow.  Had  the  war  been 

i  Compiled  from  tables  of  United  States  Department  of  Labor. 

20 


PUBLIC  INTEREST  IN  THE  PRICE  OF  MILK 

prolonged,  however,  the  policy  of  stimulating  hog 
production  at  the  expense  of  dairy  foods  would  have 
been  dangerous  in  the  extreme.  It  is  stated  that  at 
the  beginning  of  the  war  Germany  adopted  the  rule 
to  conserve  cereals  for  human  consumption  by  killing 
off  all  cows  over  two  years  old  that  could  not  be 
sustained  on  foods  and  roughage  unfit  for  human 
beings.  Milk  production  soon  fell  off.  Conse- 
quently the  children  soon  ceased  to  get  those  ele- 
ments, found  so  plentifully  in  milk,  which  are 
essential  to  sound  nutrition.  England,  on  the  other 
hand,  kept  the  largest  number  of  cows  possible  and 
bought  milk  freely  from  the  United  States. 

The  World  War  has  no  doubt  changed  permanently 
to  a  degree  the  national  and  racial  habits  as  to 
sources  of  foods.  The  extent  of  the  change  we 
cannot  measure  until  normal  conditions  have  been 
restored  for  a  number  of  years.  However,  we  have 
at  hand  a  table  showing  certain  national  and  racial 
habits  for  the  period  just  previous  to  the  war.  As  a 
general  rule  it  may  be  said  that  foods  from  vegetable 
sources  are  cheaper  than  foods  from  animal  sources, 
because  of  the  lossof  edible  solids  in  the  production  of 
animal  foods  from  organic  matter,  as  given  in  the  table 
on  page  22.  It  is  vital  to  our  national  well-being 
that  our  earners  buy  their  food  from  sources  as  cheap 
as  is  consistent  with  contentment  and  wholesome 
food  value.  Yet  a  comparison  with  other  nations  for 
this  pre-war  period  shows  that  we  were  getting  a 
larger  share  of  our  food  from  the  more  expensive 
animal  food  sources.  As  a  people  we  were,  and  no 

21 


THE  PRICE  OF  MILK 


doubt  still  are,  next  to  England,  and  excepting  the 
new  grazing  countries  mentioned  on  page  23,  the 
heaviest  consumers  of  animal  products  in  the  world. 
The  table  comparing  the  food  sources  per  capita 
of  various  competing  nations  follows; 

THE  FOOD  SOURCES  OP  THE  NATIONS1 


Protein 

Protein 

Fat 

Fat 

Total 

from 

from 

Total 

from 

from 

Country. 

Protein 
(grams). 

Animal 
Sources 

Plant 
Sources 

Fat 
(grams). 

Animal 
Sources 

Plant 
Sources 

Carbo- 
hydrates. 

Calories. 

(grams). 

(grams). 

(grams). 

(grams). 

United  States.. 

100 

60 

40 

80 

76 

i 

410 

2,950 

England 

106 

62 

44 

72 

62 

10 

440 

2,900 

Germany  

87 

32 

55 

61 

56 

5 

385 

2,700 

France  

95 

38 

57 

44 

30 

14 

420 

2,780 

Austria  

82 

34 

48 

27 

22 

5 

400 

2,500 

Russia  

85 

22 

63 

26 

16 

10 

450 

2,425 

Italy  

86 

24 

62 

52 

12 

40 

430 

2,600 

Japan      

70 

11 

59 

14 

3 

11 

490 

2,360 

The  chart  opposite  indicates  the  per  capita  con- 
sumption of  meat  for  each  of  the  leading  countries 
in  stated  pre-war  periods.  Outside  of  two  new 
grazing  countries,  Australia  and  New  Zealand  (with 
which  we  do  not  compete  in  manufacturing),  our  per 
capita  consumption  of  meats  is  far  in  excess  of  any 
country  with  which  we  will  compete  in  matters  per- 
taining to  wages  and  living  standards. 

Studies  of  family  budgets  indicate  that  of  the 
total  expenditure  for  food  of  a  working  man's  family 
consisting  of  man  and  wife  and  three  children,  ten 

i  The  figures  used  in  this  table  are  Ballod's  figures  for  1910-1914.  They  appear 
in  Smaller's  Jahrbuch,  1915.  The  data  for  Japan  have  been  weighted  to  corre- 
spond to  racial  differences  in  stature  and  weight. 

22 


PUBLIC  INTEREST  IN  THE  PRICE   OF  MILK 

per  cent  goes  for  milk  as  compared  with  forty  per 
cent  for  meats.  It  has  been  estimated  by  dietitians 
that  such  families  would  be  better  off  financially  and 
physically  if  twenty-five  per  cent  of  the  expenditure 
for  food  went  for  milk. 


CHART  No.  1. — PER  CAPITA  CONSUMPTION  OP  MEAT  IN 
DIFFERENT  COUNTRIESI 

My  argument  is  not  that  we  should  become  vege- 
tarians. My  argument  is  that  we  should  and  must 
turn  to  these  animal  products  which  are  the  cheapest 
to  produce  and  the  most  economical  to  the  con- 
sumer. These  are  primarily  dairy  products.  With 
the  passing  of  cheap  grazing  lands  we  cannot  produce 

1  From    "  The  Meat  Situation  in  the  United  States",  by  G.  K.  Holmes,  United 
States  Department  of  Agriculture,  Report  No.  109. 

23 


THE  PRICE  OF  MILK 

meat  animals  as  cheaply  as  we  once  did,  nor  as 
cheaply  as  can  other  countries  in  temperate  climates 
where  such  lands  are  not  yet  exhausted.  Clearly, 
from  the  standpoint  of  maximum  utilization  of  our 
natural  resources  as  well  as  from  considerations  of 
individual  and  family  economy,  the  relative  propor- 
tion of  dairy  products  to  other  animal  products  used 
should  be  increased. 

Had  the  milk  produced  in  the  United  States  in  the 
year  ending  June  30, 1917,  been  utilized  to  the  fullest 
extent  it  would  have  supplied  one-fourth  of  the  food 
needed  by  all  of  the  people  in  our  country.1  This 
fact  indicates  the  real  interest  of  the  people  of  this 
country  in  our  dairy  herds  as  a  source  of  foods. 

National  welfare  also  demands  attention  to  dairy 
herds  because  of  their  importance,  not  only  as  a 
source  of  food  but  as  a  source  of  wealth.  The  farm 
value  of  the  23,747,000  dairy  cows  estimated  to  be 
in  the  United  States  on  January  1, 1919,  was  $1,835,- 
770,000  (at  $78.20  per  head  as  estimated  by  the 
Department  of  Agriculture).  Prices  for  dairy  cows 
were  inflated  during  this  period,  but  not  to  the 
degree  characteristic  of  most  commodities.  The 
normal  value  under  any  circumstances  can  be  re- 
garded as  well  over  a  billion  dollars.  The  number 
of  dairy  cows  in  the  United  States  from  1867  to  1919, 
their  value  per  head  and  their  total  farm  value  was 
as  follows:2 


1  This  is  the  estimate  given  by  the  United  States  Department  of  Agriculture 
in  Circular  No.  85,  issued  January  31,  1918. 

* See  Year  Book,  1918,  United  States  Department  of  Agriculture. 

24 


PUBLIC   INTEREST  IN   THE  PRICE   OF  MILK 


NUMBER  AND  VALUE  OF  DAIRY  Cows,  U.  S.,  1867-1920. 


Year. 

Number. 

Price  per  Head, 
January  1. 

Farm  Value, 
January  1. 

Ig(j7                      

8349000 

$28  74 

$239,947  000 

1870    

10,096,000 

32.70 

330,175,000 

1875                      

10,907  000 

25.74 

280,701,000 

1880       

12,027,000 

23.27 

279,899,000 

1885        

13,905,000 

29.70 

412,903,000 

1890        

15,953,000 

22.14 

353,152,000 

1895                  

16,505,000 

21.97 

362,602,000 

1900                     

16,292,000 

31.60 

514,812,000 

1905 

17,572,000 

27.44 

482,272,000 

1910 

20,625,432 

35  29 

727  802  000 

1911 

20,823  000 

39  97 

832  209  000 

1912    

20,699  000 

39  39 

815414000 

1913  

20,497,000 

45.02 

922,783,000 

1914 

20,737,000 

53  94 

1  118487000 

1915  ,  

21,262,000 

55.33 

1,176,338  000 

1916           . 

22,108  000 

53  92 

1  191  955  000 

1917  

22,894,000 

59.63 

1,365,251,000 

1918 

23  310  000 

70  54 

1  644  231  000 

1919  

23,747,000 

78.20 

1,835,770  000 

1920  

23,747,000 

85.13 

2,021,681,000 

The  distribution  by  states  of  the  receipts  from  the 
sales  of  dairy  products  is  given  on  the  map  repro- 
duced on  page  26. 

Dairying,  moreover,  has  certain  economic  advan- 
tages in  addition  to  the  monetary  values  of  the 
annual  output  of  the  herds.  The  flow  of  milk  from 
the  herds  can  be  so  managed  as  to  bring  to  the 
farmer  a  steady  cash  income  throughout  the  year. 
The  labor  of  the  entire  family  can  be  utilized  through- 
out the  year  to  an  extent  impossible  with  seasonal 
farm  products.  The  fertility  of  the  soil  can  be  kept 
at  a  level  consistent  with  net  returns  from  the  crops. 
Roughage  which  human  beings  cannot  eat  and  for 
which  the  farmer  would  find  but  a  poor  cash  market 

25 


THE  PRICE  OF  MILK 

can  be  conserved  and  marketed  effectively  through 
the  dairy  herd. 


II.    RECEIPTS  FROM  SALES  OF  DAIRY  PRODUCTS,  19091 

From  the  point  of  view  alike  of  city  earner  and 
country  worker,  in  the  interests  of  the  national  well- 
being  and  of  the  civilization  that  can  spring  only 
from  the  well  nourished,  young  or  old,  dairy  products 
are  vital. 

Shall  we  consume,  each  of  us,  a  sufficient  amount 
of  milk  to  create  and  preserve  vigor  and  vitality? 
The  price  of  milk  must  be  such  as  to  make  this 

1  From  Geography  of  World's  Agriculture,  United  States  Department  of  Agriculture, 
1917,  p.  120:  "The  receipts  from  sale  of  dairy  products  afford  a  measure  of  the  rela- 
tive importance  of  dairying  as  an  industry  in  different  sections  of  the  United  States. 
New  York  leads  all  the  States  in  the  amount  of  receipts,  totaling  over  $75,000,000 
in  1909,  and  probably  two  to  three  times  that  amount  today.  Wisconsin  ranks 
second,  with  Pennsylvania  third,  while  Illinois,  Iowa,  Ohio  and  Minnesota  were 
practically  equal  in  amount  of  sales  of  dairy  products  in  1909,  each  receiving 
about  $25,000,000.  The  total  receipts  in  the  United  States  amounted  to  nearly 
$500,000,000  in  1909  and  are  undoubtedly  well  over  a  billion  dollars  today.  The 
dots  were  distributed  by  counties,  but  the  boundary  lines  of  the  counties  are  not 
•hown  on  the  map." 

26 


PUBLIC  INTEREST  IN  THE  PRICE  OF  MILK 


possible.  Are  we  to  produce  a  supply  of  milk  pro- 
portionate to  our  national  resources  and  sufficient 
for  our  national  needs?  The  price  to  the  farmer 
must  be  such  as  to  entice  him  to  produce  milk  in 
preference  to  the  other  alternatives  before  him, 
whether  on  the  farm  or  in  the  city. 

Price  is  the  medium  through  which  we  make  our 
national  judgments  which  will  or  will  not  maintain 
and  develop  our  all  important  dairy  industries, 
which  will  or  will  not  keep  us  virile  as  citizens.  Is 
our  production  keeping  up  with  our  needs?  Has 
the  price  been  such,  not  only  to  encourage  con- 
sumption, but  to  increase  production  as  well? 


300 

£50 

2OO 

/SO 

/OO 

SO 

O 


/aao 


CHART  No.  III. — MILK  Cows  IN  THE  UNITED  STATES  PER 
1000  POPULATION,  1810-19181 

The  table  given  on  page  25  indicates  that  the 
actual  number  of  dairy  cows  in  the  United  States 
has  been  increasing.      The   chart   above   indicates 
that,  since  1890,  the  increase  in  the  number  of  dairy 
cows  in  this  country  has  not  been  in  proportion  to 

iFrom   Circular  No.   85,   United  States  Department  of  Agriculture,   issued, 
January  31,  1918. 

27 


THE  PRICE  OF   MILK 

the  increase  in  population.  This  chart,  however, 
may  be  deceiving  as  to  the  future  to  a  very  slight 
extent  because  the  output  of  milk  per  cow  is  increas- 
ing through  selection  in  certain  sections  of  the 
country  where  dairying  is  a  profession.  Hence  the 
total  amount  of  milk  produced  is  not  decreasing  in 
exact  proportion  to  the  relative  decrease  in  the 
number  of  dairy  cows.  A  comparison  of  total  out- 
put with  the  total  number  of  milk  cows  does  not 
indicate,  however,  that  wise  selection  has  as  yet 
been  adopted  in  all  sections  of  the  country.  More- 
over, the  question  as  to  the  output  per  cow  is  not 
solely  one  of  quantity  but  of  quality  when  the 
amount  and  value  of  feeds  is  considered. 

The  number  of  milk  cows  on  the  farms  in  the 
United  States  as  of  January  1st  was  14.8  per  cent 
greater  in  1920  than  it  was  for  the  annual  average 
of  the  five-year  period  from  1910  to  1914,  in  com- 
parison with  an  increase  in  the  same  year  of  17  per 
cent  in  the  number  of  other  cattle,  17.8  per  cent  in 
swine,  3.3  per  cent  in  horses,  14.9  per  cent  in  mules, 
and  a  decrease  of  6.3  per  cent  in  the  number  of  sheep. 
Dairy  herds  increased  but  one  one-hundredth  of  one 
per  cent  in  1920  over  1919.  The  numbers  of  each 
are  given  in  the  table  on  the  next  page. 1 

The  estimated  production  of  milk  in  the  United 
States  increased  about  1.7  per  cent  from  1917  to 
1918,  as  compared  with  an  average  annual  increase 
in  population  from  1900  to  1910  of  2.1  per  cent. 
The  estimated  production  for  1919  increased  but 

1  The  Report  to  the  President  by  the  Secretary  of  Agriculture,  1918,  p.  8. 

28 


PUBLIC  INTEREST  IN  THE  PRICE  OF  MILK 


0.007  per  cent  over  1918.  Many  now  believe  (Sep- 
tember, 1920)  that  the  production  for  1920  will  be 
below  what  it  was  in  1919.  In  other  words,  the 
price  which  the  farmer  receives  for  milk  is'  not 
encouraging  him  to  enlarge  his  output  in  proportion 
to  the  increase  in  population. 

NUMBER  OF  LIVE  STOCK  ON  FARMS,  1870  TO  19181 
(Figures  are  in  round  thousands,  i.  e.,  000  omitted) 


Kind. 

1920. 

1919. 

1918. 

1917. 

1916. 

1915. 

1914. 

21,109 

21,482 

21,563 

21,210 

21,159 

21,195 

20962 

Mules       

4,995 

4,954 

4,824 

4,723 

4,593 

4,479 

4,449 

Milch  cows 

23,747 

23,475 

23,284 

22,894 

22  108 

21262 

20737 

Other  cattle     

44,485 

45,085 

43,546 

41,689 

39,812 

37,067 

35855 

Sheep    

48,615 

48,866 

48,900 

47,616 

48,625 

49,956 

49,719 

Swine                

72,909 

74,584 

71,374 

67,503 

67,766 

64,618 

58933 

Kind. 

Annual 
Average, 
1910  to 
1914. 

1910. 

1900. 

1890. 

1880. 

1870. 

Horses 

20430 

19833 

18267 

14969 

10357 

7  145 

Mules  .    . 

4,346 

4,209 

3,264 

2,295 

1,812 

1,125 

Milch  cows  

20,676 

20,625 

17,135 

16,511 

12,443 

8,935 

Other  cattle 

38000 

41  178 

50083 

33,734 

22488 

13566 

Sheep  

51,929 

52,447 

61,503 

35,935 

35,192 

28,477 

Swine 

61865 

58  185 

62868 

57409 

47681 

25134 

The  Federal  Department  of  Agriculture  estimates 
the  production  of  meat  and  milk  since  1909 
follows: 


as 


i  The  figures  for  1914-1918  are  taken  as  of  January  1st.     Figures  for  1870-1900 
are  taken  as  of  June  1st.     Figures  for  1910  as  of  April  1st. 

29 


THE  PRICE  OF  MILK 


ESTIMATED  PRODUCTION  OF  MEAT,  MILK  AND  WOOL* 
(Figures  are  in  round  thousands,  i.  e.,  000  omitted) 


Product. 

1909. 

1914. 

1916. 

1917. 

Beef2  (pounds)  ..........        .          . 

8,138,000 

6,078,908 

6,670,938 

7,384  007 

Pork*  (pounds)  

8,199,000 

8,768,532 

10,587,765 

8,450,148 

Mutton  and  goat  (pounds)               

615,000 

739,401 

633,969 

491,205 

Total  (pounds) 

16,952,000 

15  586  841 

17  892  672 

16  325,360 

Milk'  (gallons) 

7,466  408 

7  507  000 

8  003  000 

8  288,000 

Wool  including  pulled  wool  (pounds)  

289,420 

290,192 

288,490 

281,892 

Eggs  produced'  (dozens) 

1,591,000* 

1,774  000 

1,848,000 

1,884,000 

Poultry  raised3  (number)  

488,000* 

544,000 

567,000 

578,000 

Product. 

1918. 

1919. 

Per  Cent 
Increase  or 
Decrease, 
1919  over 
1909. 

Beef3  (pounds)                                                  

8,465,000 

7,500,000 

-7.84« 

Pork9  (pounds)    ...            

11,248,000 

12,868,000 

56.94 

Mutton  and  goat  (pounds)                                    .   .   . 

537,000 

637,000 

3.57 

Total  (pounds)                

20,250,000 

21,005,000 

23.90 

Milk»  (gallons)                                     

8,438,000 

8,495,000 

13.7 

Wool  including  pulled  wool  (pounds) 

298,870 

308,459 

6.57 

Eggs  produced^  (dozens)                 

1,921,000 

1,957,000 

23.00 

Poultry  raised**  (number)                                   

589,000 

600,000 

22.95 

tSee  Year  Book,  1918,  United  States  Department  of  Agriculture. 

•  Estimated  for  1914-1917  by  the  Bureau  of  Animal  Industry.    Figures  for  meat 
production  for  1918  are  tentative  estimates  based  upon  1917  production  and  a 
comparison  of  slaughter  under  Federal  inspection  for  nine  months  of  1918  with  the 
corresponding  nine  months  in  1917. 

•  Office  of  the  Secretary,  Circular  No.  125. 

•Annual  averages  for  1910-1914:    Eggs,  1,695,000,000  dozen;    poultry,  552,- 
000,000. 

•  Decrease  from  1909  to  1918 

30 


PUBLIC  INTEREST  IN  THE  PRICE  OF  MILK 


A  significant  factor  in  the  present  and  future 
situation  as  to  milk  production  has  been  the  increase 
in  the  number  of  calves  slaughtered.  The  number 
slaughtered  in  the  United  States  under  Federal  in- 
spection and  the  estimated  number  slaughtered 
otherwise  (including  farm)  together  with  the  percent- 
age of  the  total  that  was  Federal  inspected  follows: 

CALVES  SLAUGHTERED  IN  THE  UNITED  STATES,  1914-1919 


1914. 

1915. 

1916. 

1917. 

1918. 

1919. 

Federal  inspection  
Other 

1,696,962 
2,964,400 

1,818,702 
2,820,800 

2,367,303 
3,406,600 

3,142,721 
3,888,000 

3,456,393 
4,310,800 

3,969,019 
5,072,000 

Total  

4,661,400 

4,639,500 

5,773,900 

7,030,700 

7,767,200 

9,041,000 

Per  cent  Federal  inspec- 
tion 

36  4 

39  2 

41  0 

44  7 

44.5 

43  9 

The  chart  on  the  next  page  reflects  clearly  the 
unstable  competition  in  recent  years  between  the 
prices  for  feeds  and  labor  going  into  milk  and  the 
prices  for  milk  and  its  products  and  for  milk  cows. 

Corn,  hay  and  cottonseed  meal  are  chosen  as 
typical  feeds  reflecting  market  opportunities.  Other 
cereals  hover  around  the  price  of  corn;  and  cotton- 
seed meal  is  typical  of  prices  on  protein  feeds. 
Throughout  the  war  period  corn  increased  most 
rapidly  in  price  of  any  of  these  products.  Cotton- 
seed meal  for  two  years  lagged  slightly  in  price  as 
compared  with  corn  and  milk,  but  in  the  latter  part 
of  1919  exceeded  the  relative  increase  in  price  for 
both  corn  and  milk  and  continued  to  rise  while  the 

31 


CHART  No.  IV. — THE  RELATIVE  INCREASE  IN  WHOLESALE  PRICES 

FOR  MILK,  BUTTER,  AND  MILK  Cows  AND  TOR  CORN,  COTTONSEED 

MEAL,  HAY,  AND  LABOR  IN  THE  UNITED  STATES,  1910-1920 

(The  Average  for  1910  to  1914  inclusive  is  taken  as  100)1 


•COTTON-SEEDMEAL 
--  MILK  COWS 

BUTTER 

CORN 

MILK 

HAY 

FARM   LABOR 


1  The  wholesale  prices  are  from  Monthly  Crop  Reporter:     wages  from  Bureau 
of  Labor  Statistics.     The  prices  and  wages  are  given  on  page  33. 

32 


PUBLIC  INTEREST  IN  THE  PRICE  OF  MILK 


prices  on  both  the  others  fell.  The  fall  in  the  price 
of  milk  was  greater  than  that  for  corn  and  these  were 
the  only  two  of  these  products  showing  a  declining 
price  in  1919.  Butter  in  relative  increases  lagged 
behind  cottonseed  meal,  corn  and  milk,  reaching  a 
common  point  with  milk  in  the  latter  part  of  1920. 
For  labor  the  average  paid  for  farm  labor  for  the 
United  States  by  the  month  without  board  is  taken, 
the  average  being  available  only  up  to  January  1, 
1919.  This  wage  is  not  typical  for  dairy  districts 
near  munition  and  manufacturing  centers.  The  rela- 
tive increase  in  the  price  for  dairy  cows  was  not  as 
rapid  as  for  the  other  products,  with  the  single  ex- 
ception of  hay.  It  is  with  these  relative  price  fluc- 
tuations in  mind  that  milk  producers  have  made  the 
choices  reflected  in  the  diminishing  per  capita  pro- 
duction of  milk  noted  above.  The  price  of  milk 
has  not  increased  as  rapidly  as  have  feed  prices. 


Year. 

Milk 
(quart), 
Jan.  1. 

Butter 
(pound), 
Jan.  1. 

Milk  Cows 
(head), 
Jan.  15. 

Cottonseed 
Meal 
Jan.  15. 

Hay 

(ton), 
Jan.  1. 

Corn 
(bushel), 
Jan.  15. 

Farm  Labor 
without 
Board  by 
the  Month. 
Average  for 
the  U.  S. 

1010 

$0  0412 

$0  287 

$41  18 

$32  33 

$11  37 

$0  6320 

§97    en 

1911  

.0391 

278 

44  70 

31  83 

12  24 

482 

OQ  77 

1912  

.0425 

.281 

42  89 

30  42 

14  85 

622 

29  53 

1913  
1914 

.0375 
0400 

.284 
292 

49.51 
57  99 

39.97 
32  49 

11.86 
11  29 

.489 
696 

30.31 

on  OQ 

1915  

0413 

287 

58  47 

29  53 

12  42 

662 

QA     IS 

1916 

0413 

283 

57  79 

37  03 

10  94 

flOl 

qo  OQ 

1917  

.0513 

340 

63  92 

42  95 

10  86 

900 

4fl  41 

1918 

0808 

431 

78  54 

55  93 

18  09 

1  348 

47  fl.7 

1919  

.0913 

549 

86  10 

62  81 

19  92 

1  447 

eft  on 

1920  

0853 

613 

94  42 

79  39 

20  55 

1  404 

33 


THE  PRICE  OF  MILK 

In  view  of  all  the  facts  it  is  clear  that  the  price  of 
milk  is  vital  to  the  dairymen,  to  the  consumer  and 
to  the  welfare  of  the  nation.  The  consumer  wants 
to  know  what  economic  forces  are  determining  the 
price  the  farmer  receives.  The  consumer  is  deeply 
concerned  as  to  the  elements  in  the  cost  of  distribu- 
tion and  as  to  whether  the  most  economical  methods 
of  distributing  milk  consistent  with  proper  sanitary 
precautions  are  being  used.  The  farmer  wants  to 
know  why  he  gets  the  price  he  does  and  why  dis- 
tribution costs  are  what  they  are.  And  all  who  are 
considerate  of  our  national  well-being  and  the  future 
of  the  best  in  civilization  must  become  concerned  as 
to  whether  the  price  the  dairyman  receives  is  suffi- 
cient to  maintain  a  standard  of  living  among  country 
workers  consistent  with  approved  standards  of 
human  well-being. 

It  is  to  get  at  these  larger  aspects  of  one  of  our 
greatest — if  not  our  greatest  national  problem — 
that  this  book  is  written. 


CHAPTER  II 

The  Forces  that  Fix  the  Price  of  Milk 

Often  during  the  author's  public  activities  relating 
to  the  price  of  milk,  consumers  and  milk  buyers  have 
expressed  grave  fears  lest  the  forces  that  determined 
the  price  for  milk  paid  to  the  farmer  were  unduly 
influenced  by  some  association  or  "union"  of  milk 
producers.  Likewise,  on  numerous  occasions,  milk 
producers  have  shown  concern  lest  the  price  they 
received  for  milk  was  unduly  low  because  of  the 
strategic  or  "  monopolistic "  buying  power  of  the 
manufacturer  or  the  milk  distributor,  or  because  of 
the  "prejudice"  of  the  consumer.  It  is  pertinent, 
therefore,  to  inquire  just  what  the  factors  and  forces 
are  that  in  the  long  run  determine  milk  prices. 

To  be  sure,  these  forces  vary  as  between  sections 
and  as  between  seasons.  Moreover,  first  one  factor 
then  another  is  the  real  determinant.  Yet  the 
forces  which  fix  the  price  of  milk  to  the  producer  can 
be  ascertained,  and  at  any  one  time  or  place  the 
relative  importance  of  each  can  be  estimated  with 
considerable  accuracy.  These  forces  are: 

1.  The  competition  between  whole  milk  and  other 
human  foods  at  given  prices; 

2.  Racial,  national  and  local  food  habits  with 
especial  regard  for  what  the  consumers  believe  to  be 
the  food  value  of  whole  milk  as  compared  with  other 
available  foods  at  the  season's  prices; 

35 


THE  PRICE  OF  MILK 

3.  The  value  of  milk  for  manufactured  products 
such  as  butter,  cheese,  casein,  condensed  milk,  ice 
cream,  and  milk  powders; 

4.  The  competition  of  butter  fats  with  fats  from 
other  animal  and  vegetable  sources; 

5.  The  value  of  milk  as  a  food  for  other  farm 
animals; 

6.  The  cost  of  producing  milk; 

7.  The  cost  of  producing  milk  as  compared  with 
the  cost  of  producing  other  products  of  the  farm, 
and  compared  with  the  cost  of  securing  foods  from 
the  forest,  the  air  or  the  sea  with  the  resultant 
relative  scarcity  or  abundance  of  these  alternative 
foods; 

8.  The  competition  between  different  regions  and 
different  countries  with  varying  adaptability  to  milk 
production; 

9.  The  cost  and  method  of  distributing  whole  milk 
and  milk  products; 

10.  Transportation  charges  and  facilities  (local, 
national  and  international) ; 

11.  The  buying  power  of  milk  distributors  and 
manufacturers; 

12.  The  selling  powers  of  milk  producers. 

These  various  forces  are  usually  lumped  together  as 
the  "law  of  supply  and  demand/' 

Certain  of  these  forces  are  subject  to  more  or  less 
control  by  consumers,  others  by  dairymen,  some  by 
distributors  and  manufacturers,  a  few  by  city,  state 
and  national  law  makers,  some  by  the  productive 
power  and  policies  of  other  countries;  but  not  one  is 

36 


FORCES  THAT  FIX  THE  PRICE  OF  MILK 


solely  and  absolutely  under  the  control  of  any  one 
of  the  parties  interested.  To  be  sure,  consumers  will 
decide  what  they  will  eat  and  farmers  what  they 
will  produce.  But  the  choices  of  consumers  and 
producers,  if  rationally  made,  are  each  a  resultant 
of  those  larger  forces.  The  consumer  will  not  refuse 
to  eat  dairy  products  if  milk  and  its  by-products  can 
be  secured  at  reasonable  prices  as  compared  with 
other  foods  of  similar  food  value;  nor  will  the  farmer 
refuse  to  produce  if  the  net  returns  from  milk  are 
equal  to  or  greater  than  the  net  returns  from  the 
other  alternatives  before  him. 

The  Dairy  Division  of  the  National  Department 
of  Agriculture  has  made  the  following  estimates  as 
to  the  uses  to  which  the  milk  produced  in  the  United 
States  in  1917  was  put:1 

USES  TO  WHICH   MILK  WAS  PUT  IN  1917  (CALCULATIONS  BASED 
ON  ESTIMATES)2 


Item. 

Pounds  of  Milk. 

Per  Cent. 

Produce  of  22,768,000  cows  at  3716  pounds  per  annum  
Disposition  of  Milk  Product: 
1,605,587,52s1  pounds  of  butter  (at  21  pounds  milk)  
420,000,000  pounds  of  cheese  (at  10  pounds  milk) 

84,611,350,000 

33,717,338,000 
4  200  000  000 

39.9 
5  0 

1,  353,605,000!  pounds  of  condensed  milk  (at  2M  pounds  milk) 
210,000,000  gallons  of  ice  cream  (weighing  6  pounds  to  the 
gallon,  10  per  cent  fat)  
100,000,000  persons,  45  per  cent  at  0.7  pound  a  day  (cities); 
farms  with  dairy  cows  SO  per  cent,  1£  pounds  a  day;  other 
farms  and  email  towns,  25  per  cent,  1  pound  a  day,  approxi- 
mately 

3,384,012,000 
3,150,000,000 

36  500  000  000 

4.0 
3.7 

43  1 

17,500,000  calves,  whole  milk  requirement  (estimated)  

3,660,000,000 

4.3 

Total  

84,611,350000 

100  0 

1  United  States  Department  of  Agriculture  Circular  No.  85. 

2  Corrected  estimates  compiled  by  Bureau  of  Markets,  March,  1919. 

37 


THE  PRICE  OF  MILK 
These  figures  were  put  in  chart  form  as  follows: 


»'XX>' 

/*?<> 

'////, 


CHART  No.  V. — USES  TO  WHICH  THE  TOTAL  MILK  PRODUCED 
IN  THE  UNITED  STATES  Is  PuT1 

Inasmuch  as  it  is  from  the  milk  solids  that  the 
by-products  are  made,  we  can  best  picture  the  food 
uses  of  milk  from  the  following  chart  showing  the 
total  amount  of  milk  solids  produced  in  1917  and 
the  proportion  that  went  into  the  different  products. 

1  Figure  9,  Circular  85,  p.  14.     The  side  chart  shows  the  estimated  proportion 
of  the  milk  used  to  make  butter  going  into  buttermilk  and  skim  milk. 

38 


FORCES  THAT  FIX  THE  PRICE  OF  MILK 


CHART  No.  VI.1 — PROPORTION  OP  TOTAL  MILK  SOLIDS  PRODUCED 

IN  THE  UNITED  STATES  IN  1917  GOING  INTO  THE 

DIFFERENT  MILK  PRODUCTS 


BILL/ON   POUNDS 

0/234S67Q9/0///2 

^^^^^^for/4L  SOLIDS 

/A/  A//Z.A"    IO339B^-7SySOO  //////^ 

/////////  A 

y/^y//M4,  '•,74&iodo,ooo  IN  MILK  CONSUL 

'ED 

\         \ 

2729776,000    IN 

JAVA 

'  MILK 

>          i       '     1 

y/yffi,        /,386,<534,000    IN 

BUTTER 

771   r     I 

1 

FOR   CALVES 

73       1      '    1^ 

1 

^        403,000,000 

//V    /C£:    C/9£VJ 

M 

%    1      1 

1 

^        389,960,300 

4  i    i 

IN    BUTTER  Mi 

1      1 

LK 

^        316,875,000 

IN  CONDENSED   MIL 

K 

\    1      1 

1 

|         Z73,OOOpOO 

IN    CHEESE 

£         \           \ 

1 

x]          2  73yOOOflOO 

//V    WHEY 

A          1             | 

1 

From  this  chart  it  is  clear  that  the  use  of  whole 
milk  (43.1  per  cent  of  the  total)  is  the  leading 
factor  in  determining  the  price  received  by  the 
farmer.  Hence,  the  actual  or  supposed  competition 
of  whole  milk  with  other  foods  is  vital  to  the  pro- 
ducer as  well  as  to  the  consumer.  The  consumer's 
choice,  however,  is  directly  influenced  by  the  other 
alternatives  in  foods  at  prices  offered. 

From  the  standpoint  of  national  welfare,  either 
sufficient  milk  must  be  consumed  to  provide  those 
protective  elements  in  milk  that  are  essential  to 


1  ibid.,  p.  16. 


39 


THE  PRICE  OF  MILK 

sound  nutrition,  or  these  protective  elements,  dis- 
cussed more  fully  in  the  later  chapter  on  the  "Food 
Value  of  Milk",  must  be  secured  in  sufficient  quan- 
tities from  other  sources.  These  protective  elements 
are  found  most  surely  and  most  cheaply  in  milk. 

For  two  reasons  Americans  generally  have  not 
used  as  much  whole  milk  as  price  facts  warrant, 
even  after  these  facts  are  known.  One  reason  is 
that,  though  we  all  think  of  milk  as  a  food  for  chil- 
dren, many  regard  it  only  as  a  beverage  for  grown- 
ups— a  pleasant  addition  to  the  meal.  We  have 
not  yet  come  to  think  of  milk  as  a  large  ingredient 
of  a  satisfactory  meal. 

The  second  reason  is  that  humans  prefer  foods 
they  can  chew  to  foods  they  can  drink;  they  ask  for 
something  to  eat,  not  for  food  containing  nourish- 
ment. This  instinct  is  deep  seated.  It  should  be 
met  not  by  dispensing  with  milk  but  by  using  milk 
and  milk  solids  plentifully  in  solid  foods  in  addition 
to  the  use  of  milk  as  a  beverage.  In  view  of  these 
facts,  any  campaign  for  an  increase  in  the  con- 
sumption of  milk  should  stress  its  value  in  solid 
foods,  as  did  the  circulars  issued  early  in  the  spring 
of  1918  by  the  Food  Administration  of  Pennsyl- 
vania. Some  of  the  recipes  given  in  one  of  these 
circulars  appear  in  the  footnote.1 

*  TOMATO  SOUP 

6  cupfuls  milk  ^  teaspoonf til  soda 

6  tablespoonfuls  corn  flour  3  teaspoonfuls  salt 

3  cupfuls  canned  tomatoes  %  teaspoonf  ul  pepper 

Heat  five  cups  of  milk.  Mix  the  corn  flour  and  seasoning  with  one  cup  of  cold 
milk ;  add  to  the  hot  milk  and  cook  over  hot  water.  Cook  and  strain  the  tomatoes, 
add  soda  and  mix  with  the  sauce  just  before  serving. 

40 


FORCES  THAT  FIX  THE  PRICE  OF  MILK 

Differences  in  national  and  racial  food  habits  dis- 
close possibilities  for  special  education.  As  a  rule, 
negroes  do  not  consume  milk  in  the  quantities 
Anglo-Saxon  peoples  do.  Professor  McCollum  has 
accounted  by  this  fact  for  the  high  rate  of  tuber- 
culosis among  the  colored  people  in  certain  crowded 
sections  of  our  cities.  In  tropical  regions  milk  is 


SCALLOPED  VEGETABLE  OB  FISH 
2  tablespoonfuls  corn  flour  4  cupfuls  cooked  vegetable  or  fish 

1  tea  spoonful  salt  1%  cupfuls  seasoned  crumbs 
pepper                                                         2  cupfuls  milk 

Make  a  sauce  of  the  first  four  ingredients;  pour  over  the  vegetable  or  fish  in  a 
baking  dish;  cover  with  the  crumbs,  and  brown  in  the  oven. 

CREAMED  CODFISH 

4  cupfuls  milk  1  cupful  shredded  codfish 

4  tablespoonfuls  corn  flour  chopped  parsley 

pepper 

Heat  the  milk  over  hot  water,  and  thicken  with  corn  flour  mixed  in  a  little  of 
the  milk.  Add  the  codfish  and  parsley,  and  serve. 

FRIZZLED  BEEF 
Yz  pound  chipped  beef  3  tablespoonfuls  corn  flour 

2  tablespoonfuls  fat  3  cupfuls  milk 

Melt  the  fat  in  a  hot  frying  pan,  add  meat,  and  stir  until  it  browns  and  curls. 
Pour  the  milk  into  the  pan  and  stir  in  the  flour,  which  has  been  moistened  with  a 
little  of  the  cold  milk.  Cook  until  smooth  and  creamy. 

MILK  OR  CREAM  TOAST 

Pour  hot,  salted  milk  over  slices  of  toast;  or,  make  a  sauce  as  for  scalloped 
vegetable,  and  pour  this  over  the  toast.  Grated  cheese  may  be  added  to  the 
sauce,  if  desired. 

COTTAGE  CHEESE 

Pour  boiling  water  into  thick,  sour  milk,  stirring  all  the  time  until  the  whey 
begins  to  separate  from  the  curd.  Pour  into  a  thin  muslin  bag  (a  small  salt  bag 
will  do)  and  hang  up  to  drain.  When  whey  has  all  drained  out,  rub  it  smooth 
with  a  spoon;  add  salt  and  pepper,  moistened  with  milk  or  cream. 

BAKED  RICE  PUDDING 

3  tablespoonfuls  rice  H  cupful  sugar  or  corn  syrup 
1  quart  milk                                                   y±  cupful  raisins 

Place  all  in  a  baking  dish  and  cook  in  a  slow  oven,  stirring  occasionally,  until  of 
a  creamy  consistency.  Serve  hot  or  cold.  This  may  be  cooked  in  a  double  boiler 
by  using  one-half  cupful  of  rice. 

41 


THE  PRICE  OF  MILK 

generally  little  used,  though  new  methods  of  preser- 
vation may  now  increase  its  use  in  these  climates. 
The  consumption  of  dairy  products  by  individuals  of 
any  race  or  section  will  vary  with  the  season.  Larger 
quantities  of  milk  are  used  in  the  summer  and  less 
in  late  autumn  and  more  as  the  days  begin  to 
lengthen,  reaching  greatest  consumption  about 
Easter  and  declining  slightly  thereafter  until  the 
return  of  warm  weather. 

Consumption,  moreover,  is  affected  by  suggestion. 
In  one  city  of  Pennsylvania  an  "Eat  More  Milk" 
campaign,  carried  on  in  newspapers  alone,  increased 
the  total  consumption  of  milk  in  that  city  ten  per 

JUNKET 
1  quart  milk  1  rennet  tablet 

honey  or  corn  syrup  to  sweeten  and  flavor 

Heat  the  milk  until  lukewarm,  add  the  honey  or  syrup.  Dissolve  the  tablet 
in  a  tablespoonful  of  cold  water,  stir  this  into  the  warm  milk  and  pour  into  cups. 
Set  in  a  warm  place  until  it  becomes  firm;  chill  and  serve.  Vary  the  flavor  by 
using  caramel,  cocoa,  chocolate,  vanilla  or  nutmeg.  When  frozen  like  ice  cream 
it  is  delicious. 

CORN-STARCH  PUDDING 

1  quart  milk  6  tablespoonfuls  corn-starch 

4  tablespoonfuls  sugar  4  tablespoonfuls  cocoa 

a  few  grains  of  salt 

Heat  three  cupfuls  of  the  milk.  Mix  sugar,  corn-starch  and  cocoa  with  the 
remainder  of  the  milk.  Pour  this  into  the  hot  milk,  and  cook  over  hot  water 
for  thirty  minutes.  Add  salt  and  pour  into  a  mold.  When  cold,  serve  with  cream 
or  top  milk. 

Buy  at  least  a  pint  a  day  (or  every  member  of  the  family.  No  other  foods  can 
take  its  place  for  invalids  and  children.  Save  on  fat,  wheat,  sugar,  meat— but 
NOT  ON  MILK! 

Use  all  of  the  milk — waste  no  part  of  it.  Use  skimmed  milk  for  cooking.  Serve 
the  top  milk  with  breakfast  foods  and  puddings.  Use  sour  milk  in  making  muffins, 
griddle  cakes  or  cottage  cheese.  Save  the  whey  for  bread  making. 

One  pint  milk  yields  14  grams  protein  and  314  calories. 

One  pint  skimmed  milk  yields  15  grams  protein  and  166  calories. 

One  pint  buttermilk  yields  13  grams  protein  and  165  calories. 

One  pint  whey  yields  4  grams  protein  and  125  calories. 

One  pound  cottage  cheese  yields  94  grams  protein  and  510  calories. 

42 


FORCES  THAT  FIX  THE  PRICE  OF  MILK 

cent  in  two  weeks.    By  a  concert  of  many  methods 
the  per  capita  consumption  of  milk  in  Philadelphia 
in  the  early  spring  of  1918,  when  milk  was  13  cents 
a  quart,  was  brought  up  to  where  it  had  been  when ' 
milk  was  8  cents  a  quart. 

The  consumption  of  milk  in  a  family  depends  upon 
whether  wages  are  rising  or  falling  as  well  as  upon 
the  trend  in  the  price  of  milk.  Miss  Ethel  Rupert, 
for  the  Society  for  Organizing  Charities  in  Philadel- 
phia, took  responsibility  for  a  report  to  the  author 
as  to  whether  the  poor  people  in  the  city  of  Phila- 
delphia were  decreasing  milk  consumption  because 
milk  had  increased  in  price.  Her  study  was  made 
in  April  and  May  of  1918.  Data  was  secured  from 
a  total  of  1130  working  men's  families  in  the  city  of 
Philadelphia.  Comparison  in  wages  and  milk  con- 
sumption were  made  with  a  similar  period  in  1917. 
During  this  year  milk  had  advanced  from  12  to  13 
cents  per  quart.  The  results  were  as  follows: 


RELATION  OP  MILK  CONSUMED  TO  WAGES,  IN  WAGE  EARNERS' 
FAMILIES  IN  PHILADELPHIA 


114 

128 
234 
654 


Unknown 
Decreased 
Stationary 
Increased 


15.02 
19.00 
22.31 


21.45 
19.00 
15.86 


6.43 
6.46 


2.5 
2.3 
2.6 
2.6 

43" 


34 


65 
201 


51 


31 

44 
70 
194 


46 
45 
82 
228 


THE  PRICE  OF  MILK 

This  was  a  year  in  which  wages  generally  were 
increasing.  When  wages  advanced  there  was  a 
slight  tendency  to  increase  the  use  of  milk;  and  a 
slight  tendency  to  decrease  the  use  of  milk  when 
wages  did  not  keep  pace  with  living  costs.  When 
wages  remained  stationary  milk  consumption  re- 
mained stationary.  The  significant  point,  however, 
is  the  number  that  made  no  change,  whether  wages 
increased  or  decreased.  Milk  is  a  family  necessity. 

The  consumption  of  milk  is  also  directly  influenced 
by  the  prices  of  substitute  foods  on  the  market.  In 
Philadelphia  the  consumption  of  whole  milk  was 
kept  constant  despite  a  fifty  per  cent  increase  in 
price.  But  a  fifty  per  cent  increase  in  the  price  of 
butter  brought  a  substantial  decline  in  consumption. 
In  other  words,  there  were  no  foods  then  competing 
successfully  with  whole  milk  at  the  price  level  of 
thirteen  cents,  while  with  the  same  proportional  in- 
crease in  the  price  of  butter,  other  fats  came  promptly 
into  competition  with  butter. 

The  belief  of  the  people  as  to  what  is  a  fair  price 
for  milk  is  a  big  factor  in  deciding  the  quantities  in 
which  they  will  buy  it.  The  author  has  seen  the 
leaders  of  a  farmers'  organization  kill  the  consumers' 
confidence  in  the  relative  food  value  of  milk  at 
existing  prices  by  advertisements  containing  in- 
accurate statements  as  to  the  "huge  profits"  being 
exacted  by  milk  dealers.  The  purpose  in  this  was 
to  create  prejudice  against  the  milk  dealers.  In 
doing  so,  the  fanners  were  quite  indifferent  to  the 
fact  that  they  were  also  prejudicing  the  consumer 

44 


FORCES  THAT  FIX  THE  PRICE  OF  MILK 

against  the  very  commodity  they  wanted  to  sell. 
On  the  other  hand,  more  than  once  milk  distributors 
have  sought  to  turn  public  feeling  against  the  pro- 
ducers with  the  result  of  arousing  the  distrust  of  the 
consumer  in  the  fair  price  of  the  product  they  were 
distributing.  Moreover,  certain  consumers  have 
talked  of  boycotting  milk  when  it  was  the  best  food 
purchase  possible  at  the  time.  All  these  psycholog- 
ical influences  are  factors  in  price,  quite  aside  from 
the  actual  facts  as  to  the  relative  food  value  of  milk. 

Of  the  total  amount  of  milk  produced  in  this 
country,  about  39.9  per  cent  goes  into  butter  and 
into  the  by-products  of  skimmed  milk,  5  per  cent 
into  cheese,  3.7  per  cent  into  ice  cream  and  4  per 
cent  into  condensed  milk — a  total  of  52.7  per  cent. 
Since  over  half  the  total  goes  into  these  manufactured 
products,  the  demand  for  milk  for  these  purposes  is 
an  important  influence  in  fixing  the  price. 

Manufactured  milk  products  exert  a  big  influence 
on  the  price  of  milk  because  in  this  form  the  milk 
solids  can  be  stored  from  seasons  of  plenty  until 
seasons  of  scarcity  and  transported  from  regions  and 
countries  of  plenty  to  regions  and  countries  of  scar- 
city. These  influences  are  so  significant  that 
Chapter  III  is  devoted  to  them.  Later  pages  also 
discuss  the  extent  of  independence  and  interdepend- 
ence between  local,  primary,  national  and  inter- 
national markets  (Chapter  IV).  Suffice  it  to  say 
here  that  on  the  whole  the  movement  of  milk  and 
milk  products  is  so  free  that  no  local  farmers'  organi- 
zation can,  during  the  season  of  greatest  production, 

45 


THE  PRICE  OF  MILK 

command  a  price  for  whole  milk  for  city  use  above  the 
general  market  value  of  milk  for  manufactured 
products;  nor  can  local  milk  dealers  and  manufac- 
turers long  keep  a  price  to  local  farmers  below  the 
demand  of  the  wider  market.  The  comparatively 
free  interplay  of  forces  as  outlined  more  fully  in  the 
two  succeeding  chapters  go  far  toward  assuring  a 
fair  market  price  to  dairymen  and  to  milk  buyers. 

While  all  foods  are  competing  through  price  for 
selection  by  the  consumer,  the  competition  between 
batter  fats  and  fats  from  other  animal  and  vegetable 
sources  is  the  keenest  of  food  wars. 

The  following  chart  depicts  the  struggle  between 
butter  and  but  one  competitor,  viz.,  oleomargarin, 
produced  from  both  animal  and  vegetable  oils. 
While  oleomargarin  has  escaped  the  seasonal  price 
fluctuations  of  butter,  its  price  curve  has  in  general 
moved  with  that  of  butter.  The  production  of  oleo- 
margarin, however,  is  seen  to  respond  quickly  to 
the  fluctuations  in  the  price  of  butter,  indicating 
that  as  the  price  of  butter  rises  consumption  is 
transferred  to  oleomargarin.  It  is  obvious  that  the 
possibility  of  substitution  which  exists  here  tends  to 
equalize  the  prices  of  both  products. 

Fats  we  must  have,  but  their  sources  are  many. 
The  influence  of  the  price  of  butter  over  the  price 
of  milk  is  the  one  doubtful  element  of  the  future. 
The  danger  is  that  this  influence  will  keep  the  price 
to  the  farmer  too  low  to  encourage  production  rather 
than  that  it  will  keep  the  price  of  whole  milk  too 
high  for  the  city  earner. 

46 


FORCES  THAT  FIX  THE  PRICE  OF  MILK 

CHART  No.  VII. — THE  PRICE  OP  BUTTER  AND  OLEOMARGARIN 

PER  POUND,  1913-1920,  AND  THE  PRODUCTION  OP 

OLEOMARGARIN  IN  MILLIONS  OP  POUNDS, 

1917-19201 


13  1914 

[  s  3  i  Y  r 


19  i  5 1916 


4-4-4-4 


nn 


BUTTER 

OLEOMARGARIN 

PRICE 

-OLEOMARGARIN 

PRODUCTION 


£A_ 


V 


V 


V 


When  the  price  of  milk  gets  too  low  for  profitable 
sale  as  whole  milk  or  milk  products,  the  dairyman 
has  the  alternative  of  feeding  his  milk  to  young 
animals.  Of  the  present  production  4.3  per  cent  is 
used  for  this  purpose.  The  protective  elements  in 
milk  which  make  it  the  food  par  excellence  for  human 
beings,  make  it  also  the  food  par  excellence  for  grow- 
ing animals.  Moreover,  the  chemical  food  content 
itself  is  worth  considerable  for  this  purpose.  While 
this  alternative  will  act  as  a  governor  when  surplus 

1  The  price  for  butter  is  the  average  for  the  months  for  creamery  extra  Chicago 
and  for  oleomargarine  is  for  standard  uncolored  at  Chicago.  From  Bureau  of 
Labor  Statistics. 

47 


THE  PRICE  OF  MILK 

quantities  are  small,  it  cannot  be  an  influential  price 
factor  for  all  milk. 

Unless  milk  producers  can  get  net  returns  from 
milk  equal  to  the  returns  from  other  farm  products 
or  from  efforts  in  other  industries,  milk  will  not  be 
produced.  To  the  extent  that  dairymen  at  any 
given  time  choose  other  alternatives  with  larger  net 
returns,  the  production  of  milk  will  be  decreased. 
In  proportion  in  which  milk  offers  larger  net  returns 
than  in  the  long  run  can  be  secured  from  efforts  in 
other  fields,  milk  production  will  be  increased.  These 
cost  factors  determine  the  relative  scarcity  and 
abundance  of  foods.  They  are,  therefore,  the  prima- 
ry factors  in  determining  price,  and  hence  a  separate 
chapter  (V)  is  devoted  to  the  cost  of  producing  milk. 

But  some  sections  and  some  countries  are  better 
fitted  for  milk  production  than  others.  The  rivalry 
in  prices  between  various  sections  and  countries  is 
so  important  that  the  major  portion  of  the  two 
following  chapters  is  devoted  to  it.  A  given  dairy- 
man may  not  be  compensated  for  all  his  expenses  of 
production  if  milk  can  be  produced  on  other  farms  or 
in  other  sections  at  less  cost.  There  is  as  much 
competition  between  areas  and  countries  as  between 
foods;  and  the  price  influence  of  areas  peculiarly 
adapted  to  milk  production  is  ever  present. 

But  to  the  cost  of  production  must  be  added,  for 
that  milk  consumed  as  whole  milk,  the  costs  of 
transportation  and  distribution.  These  costs  plus 
expenses  of  production  are  the  important,  though 
not  the  only  forces  that  determine  what  the  con- 

48 


FORCES  THAT  FIX  THE  PRICE  OF  MILK 

sumer  pays  for  whole  milk.  Distribution  and  trans- 
portation costs  and  facilities  also  influence  directly 
the  price  which  the  producer  receives.  If  these 
costs  are  excessive  the  consumer  chooses  something 
else  to  eat  as  far  as  possible — and  that  "possible"  is 
often  sufficient  to  cause  producer's  prices  to  tumble. 
In  this  sense  the  price  the  producer  receives  is  the 
price  the  consumer  pays,  less  the  amounts  taken  out 
for  transportation  and  distribution.  To  all  these 
costs,  including  the  costs  incident  to  keeping  milk 
wholesome,  the  chapters  in  Part  II  are  devoted. 

But  after  all  these  price  determining  forces  are 
weighed  there  still  remains  the  buying  and  selling 
powers,  the  comparative  bargaining  powers,  of  those 
who  buy  and  those  who  sell  milk.  The  general 
forces  do  not  automatically  fix  a  price  undisturbed 
by  efforts  of  buyers  and  sellers  to  swing  the  price  to 
their  advantage.  The  price  for  any  day  or  month 
is  a  man-made  guess  as  to  where  the  fundamental 
price-fixing  forces  will  allow  the  price  to  rest.  If  the 
distributors  and  manufacturers  have  developed  a 
well  organized  purchasing  power  and  the  sellers  of 
milk  little  or  no  organized  selling  power,  the  price 
for  milk  is  below  what  it  would  be  if  the  producers 
have  a  well  organized  selling  power  and  the  buyers 
have  a  poor  purchasing  power.  In  both  cases  the 
price  is  different  from  what  it  would  be  if  the  buying 
and  selling  powers  were  equal,  as  they  must  be  to 
arrive  at  a  fair  price.  These  bargaining  forces  are 
discussed  further  in  Chapters  VI  and  VII. 

Such,  in  the  main,  are  the  influences  that  deter- 

4  49 


THE  PRICE  OF  MILK 

mine  the  price  of  whole  milk  and  of  manufactured 
dairy  products.  They  are  not  simple,  but  they  are 
all  important.  For  in  their  free  and  proper  expres- 
sion lies  the  well-being  of  all  our  people,  both  those 
who  produce  in  the  country  and  those  who  consume 
in  the  city. 


80 


CHAPTER  III 

Manufactured  Milk  Products  in  Their  Relation  to  Price 

The  amount  of  butter  produced  in  this  country 
increased  from  1,491,871,673  pounds  in  1899  to 
1,619,415,263  pounds  in  1909  and  fell  to  1,605,587,525 
pounds  in  1917.  This  was  an  increase  of  about  8  per 
cent  in  production  from  1899  to  1917.  The  estimated 
production  for  1919  was  1,549,000,000  pounds,  a 
decrease  over  1917.  The  cheese  produced  increased 
from  298,344,654  pounds  in  1899  to  320,532,181 
pounds  in  1909  and  to  420,000,000  pounds  (esti- 
mated) in  1917,  an  increase  of  40  per  cent  in  the 
same  period.  The  estimated  production  for  1919 
(378,000,000  pounds)  was  below  that  of  1917.  The 
production  of  condensed  milk  in  the  United  States 
increased  from  186,921,787  pounds  in  1899  to  494,- 
796,544  and  1,353,605,000  pounds  in  1909  and  1917 
respectively,  an  increase  of  64  per  cent  in  these 
dozen  and  a  half  years.  The  production  for  1919 
(estimated  at  1,815,502,790  pounds)  was  substan- 
tially above  that  of  1917.  The  figures  for  1899  and 
1909  are  from  census  reports,  while  those  for  1917 
and  1919  are  the  estimates  of  the  United  States 
Department  of  Agriculture.  The  value  of  all  these 
products  increased  from  $136,365,983  in  1897  to 
$307,255,277  in  1899,  to  $498,567,866  in  1909  and 
to  $863,000,000  in  1917.  Over  one-half  (52  per  cent) 
of  the  milk  produced  in  the  United  States  goes  into 

51 


THE  PRICE  OF  MILK 


manufactured  milk  products,  including  ice  cream. 
This  fact  and  the  relative  amounts  and  values  pro- 
duced as  given  above  will  indicate  at  once  the 
important  bearing  that  the  prices  for  the  various 
manufactured  products  have  on  whole  milk. 

THE  PRODUCTS  MANUFACTURED  FROM  MILK  IN  THE  UNITED  STATES 
AND  THE  TOTAL  QUANTITIES  OF  EACH  FOR  1918  AND  1919 


Products. 


Creamery  butter 

Whey  butter  (made  from  whey) 

American  cheese  (whole  milk) 

American  cheese  (part  skim) 

American  cheese  (full  skim) 

Swiss  cheese  (includes  block) 

Brick  and  Munster  cheese , 

Limburger  cheese 

Cottage,  pot,  and  bakers'  cheese 

Cream  and  Neufchatel  cheese 

All  Italian  varieties  of  cheese 

All  other  varieties  of  cheeae 

Dried  casein  (buttermilk  product) 

Sweetened  condensed  skimmed  milk  (case  goods) 

Sweetened  condensed  unskimmed  milk  (case  goods) 

Sweetened  condensed  skimmed  milk  (bulk  goods) 

Sweetened  condensed  unskimmed  milk  (bulk  goods) 

Unsweetened  evaporated  skimmed  milk  (case  goods) 

Unsweetened  evaporated  unskimmed  milk  (case  goods) 

Unsweetened  evaporated  skimmed  milk  (bulk  goods) 

Unsweetened  evaporated  unskimmed  milk  (bulk  goods) 

Evaporated  part  or  full  skimmed  milk  modified  with  foreign  fat 

(case  goods)  

Evaporated  part  or  full  skimmed  milk  modified  with  foreign  fat 

(bulk  goods) 

Sterilized  milk  (canned  same  as  condensed) 

Condensed  and  evaporated  buttermilk 

Dried  or  powdered  buttermilk 

Powdered  whole  milk 

Powdered  skimmed  milk 

Powdered  cream 

Malted  milk 

Milk  sugar  (crude) 

Ice  cream  of  all  kinds  (gallons) 


1918 

(pounds). 


793,275,309 

5,510,213 

247,276,503 

9,102,159 

6,610,993 

18,586,505 

43,332,215 

8,808,140 

27,802,037 

5,774,630 

2,042,234 

11,088,236 

97,196 

8,653,067 

411,224,893 

46,303,494 

40,871,997 

12,049,163 

016,437,919 

56,781,752 

183,611,949 

41,033,855 

7,591,182 

6,257,710 

6,534,023 

4,341,157 

4,164,334 

25,432,007 

654,360 

15,654,243 

2,749,928 

122,900,106 


1919 

(pounds). 

851,269,140 

5,597,308 

281,836,015 

6,189,192 

6,985,356 

20,387,306 

37,521,004 

7,625:541 

29,785,329 

5,500,639 

3,987,361 

9,661,497 

722,151 

7,231,630 

568,250,861 

61,791,696 

36,910,038 

3,626,172 

1,159,217,649 

65,442,286 

74,985,073 

62,262,225 

2,748,120 
4,414,818 

22,535,580 
5,278,827 
8,660,785 

33,076,131 
592,070 

17,495,887 

6,221,342 

127,840,204 


52 


MANUFACTURED   MILK  PRODUCTS 

The  preceding  table  gives  the  products  manufac- 
tured from  milk  in  the  United  States  in  1918  and 
1919,  with  the  quantities  of  each. 

Milk  is  worth  more  for  consumption  as  whole 
milk  than  it  is  in  any  manufactured  form.  In 
order  to  meet  fluctuations  in  demand  the  whole  milk 
distributor  must  have  a  supply  equal  to  his  maximum 
demand  on  any  day  or  in  any  season.  This  means 
he  will  usually  have  a  larger  or  smaller  amount  of 
what  he  calls  surplus  milk.  As  the  value  of  the 
milk  for  whole  milk  consumption  is  usually  above 
its  value  when  made  into  manufactured  products, 
the  dealer  may  have  to  take  a  loss  on  the  surplus  so 
manufactured.  Moreover,  some  whole  milk  dealers 
do  not  have  the  facilities  for  the  efficient  manufacture 
of  milk  products. 

This  surplus  problem  of  the  whole  milk  dealer  is 
shown  by  the  chart  on  page  54  giving  separately 
the  supply  received  through  the  regular  receiving 
stations  of  this  dealer  and  the  demand  from  his  con- 
sumers for  milk  (the  whole  milk  sold)  for  each  of 
the  months  for  the  years  1915,  1916  and  1917, 
respectively. 

It  will  be  noticed  that  in  1915  the  period  of  greatest 
supply  came  in  the  first  week  of  June,  with  a  slight 
increase  in  the  first  week  in  August  and  a  marked 
decline  in  the  last  week  of  September.  The  mini- 
mum production  was  received  in  the  first  week  in 
December.  In  the  year  1916  the  time  of  high 
supply  comes  about  June  10th,  with  a  slight  increase 
about  the  middle  of  August,  and  the  period  of  lowest 

53 


THE  PRICE  OF  MILK 


§    I 


£ 


"i   i 


T±a 


N 

s 


u 


54 


MANUFACTURED  MILK  PRODUCTS 

supply  is  reached  in  the  middle  of  October,  with  the 
second  minimum  of  production  in  the  middle  of 
November,  after  which  time  the  production  gradually 
increases.  For  the  year  1917  the  maximum  produc- 
tion is  reached  the  last  week  in  June,  with  an  increase 
in  supply  the  last  week  in  August  and  the  minimum 
supply  about  the  middle  of  December.  Maximum 
consumption  came  in  the  middle  of  August. 

It  is  to  be  noted  that  during  a  considerable  portion 
of  each  year  this  dealer  had  to  buy  a  varying  amount 
of  milk  from  other  sources  than  his  own  receiving 
station  supply.  This  means  that  he  bought  milk 
from  outlying  creameries  in  the  months  when  he  was 
short,  rather  than  have  the  annual  expense  of  main- 
taining his  own  stations.  Had  he  a  supply  of  his 
own  sufficient  for  his  trade  the  year  round,  his 
surplus  would  have  been  all  the  greater.  It  is  often 
a  close  question  as  to  whether  it  pays  a  milk  dealer 
to  get  a  supply  sufficient  for  all  the  year.  If  he 
does  he  has  the  costs  and  risks  of  surplus.  If  he 
does  not  he  must  pay  a  premium  to  some  concern 
for  milk  when  he  is  short.  In  the  last  year  or  two 
some  have  made  up  this  shortage  with  remade  milk. 
(See  Chapter  VII.) 

Most  important  of  all  it  is  to  be  noted  that  neither 
supply  nor  demand  could  be  effectively  prophesied 
in  their  relation  to  each  other.  Thus  in  1915  in  the 
last  week  in  September  when  there  is  an  increase  in 
the  use  of  milk,  probably  because  of  hot  weather, 
there  is  at  the  same  time  a  rapid  fall  in  the  amount 
of  milk  produced.  The  same  thing  is  to  be  noted 

55 


THE  PRICE  OF  MILK 

for  the  first  week  in  May  of  the  same  year.  In  the 
autumn  months,  when  the  consumption  remains 
fairly  constant,  production  decreases  very  rapidly. 
The  effect  of  a  hot  and  cool  week  following  each 
other  closely  is  shown  in  the  month  of  August,  1916. 
During  the  middle  of  that  month  there  is  a  marked 
increase  in  comsumption  of  whole  milk,  with  a 
marked  decrease  in  production  because  of  hot 
weather,  followed  by  a  decrease  in  consumption  and 
an  increase  in  production  because  of  cool  weather. 
Again  in  the  middle  of  October,  1916,  there  is  an 
increase  in  consumption  for  the  very  week  that 
brought  the  minimum  decrease  in  production.  The 
actual  supply  and  demand  were  seldom  if  ever  at 
equilibrium. 

Taking  the  average  receipts  for  October,  Novem- 
ber and  December,  1919,  as  a  base,  seven  distributing 
and  manufacturing  companies  in  the  Philadelphia 
district  had  a  surplus  in  pounds  for  the  first  six 
months  of  1920  as  follows: 


January. 

February. 

March. 

April. 

May. 

June. 

3,631,261 

4,285,799 

6,346,028 

6,712,848 

12,631,506 

15,035,500 

The  amount  of  this  surplus  to  be  manufactured 
will  vary  in  the  same  city  as  between  dealers,  and 
indeed  for  the  same  dealer  in  different  years.  Here 
is  one  company  which  received  1,600,000  quarts  in 
the  December  of  1919  as  compared  with  3,100,000 
quarts  in  the  previous  June,  while  another  dealer  in 

56 


MANUFACTURED  MILK  PRODUCTS 

the  same  city  with  about  the  same  receipts  for 
December  had  purchased  but  250,000  quarts  more 
in  June  than  he  received  in  December.  Another 
dealer  will  be  using  but  one-third  of  his  total  pur- 
chases in  June  in  his  whole  milk  trade  and  yet  use 
all  his  supply  for  the  whole  milk  trade  in  December. 

To  secure  a  supply  adequate  for  whole  milk  sales 
the  dealer  must  (1)  have  the  facilities  for  manufac- 
turing the  surplus  or  (2)  take  the  losses  on  wasting 
the  surplus,  or,  (3)  maintaining  a  supply  fairly  con- 
stant with  sales,  pay  a  premium  for  milk  in  time  of 
scarcity.  All  methods  are  used,  but  dealers  are  as 
a  rule  equipping  themselves  to  care  efficiently  for  all 
the  milk  coming  to  their  platforms,  at  least  from 
their  regular  patrons.  By  surplus  milk  is  meant  the 
excess  of  milk  coming  to  the  plants  of  whole  milk 
dealers  at  certain  seasons  of  the  year  above  the  nor- 
mal sales  of  whole  milk.  This  surplus  is  really  in- 
surance for  an  adequate  supply  of  whole  milk  to 
meet  varying  trade  demands  and  losses  in  transit  or 
losses  due  to  sour  milk. 

The  exact  time  of  the  occurrence  of  the  milk  surplus 
of  course  varies  from  state  to  state,  as  well  as  within 
narrower  boundaries,  but  in  general  it  comes  in  April, 
May  and  June,  with  a  decrease  below  the  average , 
in  certain  other  months,  particularly  in  October, 
November  and  December. 

If  the  farmer,  gives  the  dealer  during  three  months 
of  the  year  say  one-fifth  more  milk  than  the  dis- 
tributor may  be  able  to  sell  through  his  whole  milk 
trade,  the  dealer  must  possess  some  other  means  of 

57 


THE  PRICE  OF  MILK 

getting  rid  of  this  extra  milk  at  the  usual  market 
price,  or  he  must  pay  a  smaller  amount  to  the  pro- 
ducer. Similarly,  if  the  producer  has  a  contract 
with  the  distributor  to  furnish  him  with  a  certain 
amount  of  milk  per  day,  and  has,  therefore,  at  times 
a  surplus  on  hand  which  he  is  unable  to  get  rid  of 
except  through  extraordinary  channels  at  very  low 
rates,  it  necessarily  follows  that  he  must  get  more 
for  the  milk  he  sells. 

In  general  there  are  two  ways  in  which  the  milk 
surplus  may  be  utilized:  It  may  be  converted  into 
such  form  as  will  allow  it  to  be  stored  for  at  least 
several  months;  or  there  may  be  created  some  new 
demand  for  milk  at  the  particular  season  at  which 
the  surplus  comes.  If  the  first  means  be  selected, 
it  is  usually  converted  into  butter,  cheese  or  con- 
densed milk.  Cream  may  be  taken  from  the  milk 
and  stored  for  as  long  as  six  months,  without  any 
substantial  change  in  the  bacterial  count. 

It  is  commercially  impossible  to  create  a  demand 
for  milk  that  will  automatically  take  care  of  the 
surplus  from  week  to  week.  For  instance,  the  peak 
in  ice  cream  demand  will  not  come  before  July  4th, 
by  which  time  production  is  declining. 

In  the  past  the  price  of  butter  was  based  on  the 
cost  of  turning  milk  into  butter  on  the  farm  or  in 
small  cross-road  creameries.  When  this  was  the 
case  no  special  manufacturing  facilities  were  needed 
by  a  whole  milk  dealer  to  compete  in  price  with  those 
butter  manufacturers  who  had  efficient  equipment. 
Of  recent  years,  however,  the  large  factory  has  been 

58 


MANUFACTURED  MILK  PRODUCTS 

gaining  over  domestic  manufacture  or  small  cream- 
eries because  of  savings  in  the  manufacture  of 
skimmed  milk  and  lower  unit  costs  due  to  larger 
quantities  handled.  Many  milk  dealers  are,  there- 
fore, now  equipped  to  condense  their  surplus  skim 
milk  or  convert  it  into  skim  milk  powder.  Those 
who  are  not  thus  equipped  are  losing  out  in  the 
economical  handling  of  milk.  Other  dealers  have 
added  an  ice  cream  business  to  their  whole  milk 
business  in  addition  to  putting  their  own  butter  and 
cheese  out  for  sale  on  their  retail  milk  wagons. 
More  and  more,  therefore,  the  surplus  is  being  cared 
for  by  milk  dealers  economically  and  without  waste, 
though  large  quantities  of  skim  milk  are  still  turned 
into  the  creek  or  the  sewer  by  those  not  equipped  to 
save  it.  It  is  to  the  interest  of  all  that  the  milk  of 
the  country  flow  into  those  plants  equipped  to  save 
and  utilize  economically  all  the  milk  solids.  Those 
dealers  make  most  money  who  can  immediately  take 
advantage  of  the  best  the  market  offers  in  price, 
whether  that  be  for  whole  milk,  for  condensed  milk, 
for  cheese,  for  skim  milk  powders  or  for  casein. 

However  the  dealer's  surplus  may  be  handled  (and 
surplus  he  must  have),  there  must  be  a  direct  relation 
between  the  price  the  dealer  can  afford  to  pay  for 
whole  milk  as  based  on  the  price  paid  by  the  con- 
sumer and  the  price  he  can  receive  for  the  product 
or  products  into  which  he  manufactures  his  surplus. 
Indeed,  the  relation  between  the  price  which  the 
dealer  receives  for  his  surplus  in  the  form  of  manu- 
factured products  and  the  price  he  can  pay  for  whole 

59 


THE  PRICE  OF  MILK 

milk  for  distribution  to  consumers  is  so  close  that  it 
may  be  possible  to  use  the  former  in  computing  the 
latter. 

A  plan  for  using  the  price  of  butter  and  cheese,  the 
leading  products  manufactured  from  milk,  as  a  basis 
for  determining  the  price  of  whole  milk  has  recently 
(1919)  been  tried  out  in  the  New  York  district. 
Table  A  gives  the  value  of  whole  milk  at  the  different 
price  levels  of  butter  and  cheese. 

The  price  of  whole  milk  thus  found  is  readjusted 
by  adding  the  sums  indicated  in  Table  B  for  nine 
months,  while  for  the  three  months  of  maximum 
production  15  cents  a  cwt.  is  deducted.  This  table 
also  gives  the  price  for  whole  milk  as  based  on  the 
actual  market  values  of  butter  and  cheese  that  pre- 
vailed by  months  for  the  year  1918  and  for  the  first 
two  months  of  1919. 

The  committee  reporting  this  plan  thus  explained 
its  application: 

We  wish  to  call  your  particular  attention  to  the 
fact  that  this  plan  does  not  mean  that  producers 
would  sell  their  milk  at  its  value  in  butter  and 
cheese.  Not  only  have  we  provided  a  very  liberal 
allowance  for  skim  milk  and  whey,  but  in  addition 
we  have  allowed  the  New  York  market  price  for 
high  grade  goods  without  any  deduction  for  manu- 
facture, packing,  freight  and  commission.  If 
milk  were  manufactured  into  butter  or  cheese 
these  costs  would  necessarily  have  to  be  deducted 
from  the  New  York  market  prices,  and  in  figuring 
the  value  of  this  allowance  to  the  producer,  we  have 
used  the  very  conservative  figures  of  3  cents  per 

60 


MANUFACTURED  MILK  PRODUCTS 


TABLE  A. — VALUE  OF  WHOLE  MILK  BASED  ON  THE  MARKET 
VALUES  OP  BUTTER  AND  CHEESE 


Butter 
Yield,  4 
Per  Cent 
Milk, 
Allowing 
16 
Per  Cent 
Over-run 

Butter, 
Cents 
per 
Pound 
Fresh. 
Extras 
92 
Score. 

Value. 

Value, 
Skim 
Milk 
per 
cwt.  of 
Whole 
Milk. 

Total 
Value, 
Butter 
and 
Skim 
Milk. 

Cheese 
Yield, 
4 
Per  Cent 
Milk 
(pounds) 

Cheese, 
Cents, 
per 
Pound. 
Fresh, 
Average 
Run. 

Value. 

Value, 
Whey 
per 
cwt.  of 
Whole 
Milk. 

Total 
Value, 
Cheese 
and 
Whey. 

(pounds) 

4.64 

71 

$3.29 

$1.12 

$4.41 

10.60 

37 

$-3.92 

$0.25 

$4.17 

70 

3.25 

1.10 

4.35 

1 

36H 

3.87 

.25 

4.12 

,«* 

69 

3.20 

1.08 

4.28 

36 

3.82 

.25 

4.07 

68 

3.16 

1.06 

4.22 

35^ 

3.76 

.24 

4.00 

67 

3.11 

1.04 

4.15 

35 

3.71 

.24 

3.95 

66 

3.06 

1.02 

4.08 

34K 

3.66 

.24 

3.90 

65 

3.02 

1.00 

4.02 

34 

3.61 

.23 

3.84 

64 

2.97 

.98 

3.95 

33^ 

3.55 

.23 

3.78 

63 

2.92 

.96 

3.88 

33 

3.50 

.23 

3.73 

62 

2.88 

.94 

3.82 

32H 

3.45 

.22 

3.67 

61 

2.83 

.92 

3.75 

32 

3.40 

.22 

3.62 

60 

2.78 

.90 

3.68 

31J* 

3.34 

.22 

3.56 

59 

2.73 

.88 

3.61 

31 

3.29 

.21 

3.50 

58 

2.69 

.86 

3.55 

30^ 

3.24 

.21 

3.45 

57 

2.64 

.84 

3.48 

30 

3.18 

.21 

3.39 

56 

2.60 

.82 

3.42 

29H 

3.12 

.20 

3.32 

55 

2.55 

.80 

3.35 

29 

3.07 

.20 

3.27 

54 

2.51 

.78 

3.29 

28^ 

3.02 

.20 

3.22 

1 

53 

2.46 

.76 

3.22 

28 

2.96 

.19 

3.15 

52 

2.42 

.74 

3.15 

27^ 

2.91 

.19 

3.10 

4 

51 

2.37 

.72 

3.09 

27 

2.86 

.19 

3.05 

1 

50 

2.32 

.70 

3.02 

26H 

2.81 

.18 

2.99 

' 

49 

2.27 

.68 

2.95 

26 

2.75 

.18 

2.93 

1 

48 

2.23 

.66 

2.89 

25H 

2.70 

.18 

2.88 

1 

47 

2.18 

.64 

2.82 

25 

2.65 

.17 

2.82 

1 

46 

2.13 

.62 

2.75 

24H 

2.60 

.17 

2.77 

1 

45 

2.09 

.60 

2.69 

24 

2.54 

.17 

2.71 

44 

2.04 

.58 

,2.62 

23H 

2.49 

.16 

2.65 

' 

43 

2.00 

.56 

2.56 

23 

2.44 

.16 

2.60 

1 

42 

1.95 

.54 

2.49 

22^ 

2.39 

.16 

2.55 

1 

41 

1.90 

.52 

2.42 

22 

2.33 

.15 

2.48 

1 

40 

.86 

.50 

2.36 

2iy2 

2.28 

.15 

2.43 

' 

39 

.81 

.48 

2.29 

21 

2.23 

.15 

2.38 

1 

38 

.76 

.46 

2.22 

20^ 

2.17 

.14 

2.31 

' 

37 

.72 

.44 

2.16 

20 

2.12 

.14 

2.26 

1 

36 

.67 

.42 

2.09 

19^ 

2.07 

.14 

2.11 

35 

.62 

.40 

2.02 

19 

2.01 

.13 

2.14 

1 

34 

.57 

.38 

.95 

W/2 

.96 

.13 

2.09 

1 

33 

.53 

.36 

.89 

18 

.91 

.13 

.98 

32 

.48 

.34 

.82 

17H 

.86 

.12 

.92 

1 

31 

.44 

.32 

.76 

17 

.80 

.12 

.87 

' 

30 

.39 

.30 

.69 

16H 

.75 

.12 

.81 

1 

29 

.34 

.28 

.62 

16 

.70 

.11 

.81 

28 

.30 

.26 

.56 

15^ 

.64 

.11 

.75 

11 

27 

.25 

24 

1  49 

15 

59 

.11 

.70 

" 

26 

1.20 

.22 

1.42 

14J^ 

1.54 

.10 

1.64 

25 

1.16 

.20 

1.36 

14 

1.48 

.10 

1.58 

61 


THE  PRICE  OF  MILK 


TABLE  B. — NEW  YOBK  PLAN  FOR  BUYING  WHOLE  MILK  BASED 
ON  THE  MARKET  VALUES  OF  BUTTER  AND  CHEESE 


New  York  Market 

4  Per  Cent 

Average, 

Prices, 

Whole  Milk, 

4  Per  Cent 

Cents  per  Pound. 

Value  in 

Whole  Milk 

Adjustment 
for 

Net 
Price 

Date. 

eluding  Aver- 

Conditions 

4 

Cheese, 

age  Costs  of 

Peculiar  to 

Per  Cent 

Butter, 

Fresh 

Manufacture, 

New  York 

Whole 

Fresh 
Extras. 

Average 
Run. 

Butter. 

Cheese. 

etc.,  of  34 
Cents  per 

Territory. 

Milk. 

100  Pounds. 

1918. 

January  

52.2 

23.3 

13.17 

$2.63 

$2.90i 

+$0.16 

$3.06i 

February  

51.1 

23.3 

3.09 

2.63 

2.86i 

+     .16 

3.02i 

March  

44.5 

23.4 

2.66 

2.64 

2.65i 

+    .16 

2.81i 

April  

43.3 

22.2 

2.58 

2.50 

2.54 

-     .15 

2.39 

May.. 

45.3 

22.3 

2.71 

2.52 

2.62 

—     .15 

2.47 

June  

43.9 

23.2 

2.61 

2.62 

2.62 

-     .15 

2.47 

July 

44.8 

24.5 

2.68 

2.77 

2.72 

+    .16 

2.88 

August  

46.0 

25.7 

2.75 

2.90 

2.83 

+    -36 

3.19 

September  

55.9 

27.8 

3.41 

3.14 

3.27 

+    .36 

3.63 

October  

58.7 

32.2 

3.59 

3.63 

3.61 

+    .16 

3.77 

November  

63.2 

32.7 

3.90 

3.69 

3.79 

•f     .16 

3.95 

December  

68.6 

36.0 

4.26 

4.07 

4.16 

+     .16 

4.32 

1919. 

January 

61.8 

35.5 

3.80 

4.00 

3.90 

+     .16 

4.06 

February  

51.8 

30.0 

3.14 

3.39 

3.27 

+     .16 

3.43 

pound  for  butter  and  2f  cents  per  pound  for 
cheese,  though  we  are  advised  the  actual  costs  of 
manufacture  and  marketing  are  greater.  Further, 
we  have  valued  the  skim  milk  and  whey  in  100 
pounds  of  whole  milk  at  the  prices  heretofore  paid 
for  100  pounds  of  such  by-products  when  butter 


1  In  any  comparison  of  values  for  the  first  three  months  of  1918  it  must  necessarily 
be  borne  in  mind  that  due  to  the  placing  of  embargoes  on  ocean  traffic  by  the 
Government  on  account  of  having  to  use  all  available  vessel  space  for  troops,  muni- 
tions, equipment,  etc.,  supplies  of  butter  and  cheese,  as  well  as  other  food  products, 
intended  for  shipment  to  Europe,  were  unable  to  be  moved,  and  due  to  over- 
stocked markets  values  were  demoralized.  This  created  an  abnormal  situation, 
a  repetition  of  which  is  most  unlikely. 

62 


MANUFACTURED  MILK  PRODUCTS 

and  cheese  sold  at  the  figures  shown  in  Table  A, 
notwithstanding  not  more  than  85  pounds  of  skim 
milk  or  90  pounds  of  whey  can  be  secured  from  100 
pounds  of  whole  milk.  We  figure  that  all  these 
allowances  are  equivalent  to  approximately  34 
cents  per  100  pounds  of  milk. 

This  plan  recognizes  the  expense  of  producing 
milk  in  this  territory  by  the  addition  of  certain 
arbitraries;  and  likewise  offsets  the  tendency  to- 
ward an  increased  summer  production  by  deduc- 
tions in  the  three  months  April,  May  and  June. 
The  deductions  so  made  taken  into  consideration 
in  establishing  the  arbitraries  added  to  subsequent 
months.  (See  Table  B.) 

The  method  of  arriving  at  a  price  would  be  as 
follows: 

The  market  values  of  butter  and  cheese  would 
be  ascertained  from  the  "Producers'  Price  Cur- 
rent/' an  official  report  of  transactions  in  butter, 
cheese  and  other  commodities  sold  in  New  York 
markets,  issued  daily. 

Take  for  illustration  the  month  of  December, 
1918.  Table  B  shows  that  the  average  price  of  92 
score  butter  for  that  month  was  68.6  and  cheese 
36  cents  per  pound.  The  return  of  4.64  pounds 
of  butter  at  68.6  cents  per  pound  would  be  $3.18 
(actually  $3.18304),  and  Table  A  shows  that  the 
skim  milk  with  butter  at  68.6  cents  per  pound  would 
have  a  value  of  $1.072,  making  the  total  value  of 
100  pounds  of  4  per  cent  milk  on  a  butter  basis  of 
$4.255.  At  36  cents  per  pound  Table  A  indicates 
that  10.6  pounds  of  cheese  would  have  a  value  of 
$3.82,  and  on  this  basis  whey  is  valued  at  25 
cents,  making  a  total  value  for  cheese  and  whey  of 
$4.07,  or  an  average  value  on  a  butter  and  cheese 
basis  of  $4.16.  To  this  would  be  added  16  cents 

63 


THE  PRICE  OF  MILK 

as  a  further  premium  for  meeting  the  costs  of 
production  and  conditions  peculiar  to  milk  pro- 
duced in  this  territory,  making  a  total  price,  under 
this  plan,  for  100  pounds  of  4  per  cent  milk  in  the 
month  of  December,  1918,  of  $4.32. 

Similarly,  taking  the  month  of  June,  1918,  as 
the  price  of  butter  was  43.9  cents  and  the  price  of 
cheese  23.2  cents,  by  figuring  in  just  the  same  way 
as  above,  the  value  of  100  pounds  of  4  per  cent 
milk  on  a  butter  basis  would  be  $2.61  and  on  a 
cheese  basis  $2.62,  and  the  average  of  these  would 
be  $2.62.  June  being  one  of  the  three  flush  months 
in  which  there  would  be  a  deduction  of  15  cents, 
price  for  100  pounds  of  4  per  cent  milk  would  be 
$2.47. 

The  basic  price  to  be  considered  is  milk  testing 
3.6  per  cent  butter  fat.  To  ascertain  such  basic 
figure  the  price  for  4  per  cent  milk  as  determined  in 
accordance  with  plan  is  to  be  divided  by  4  and 
multiplied  by  3.6.  The  price  of  milk  for  tests 
other  than  3.6  per  cent  to  be  arrived  at  by  adding 
or  deducting  4  cents  per  100  Ibs.  for  each  one- 
tenth  of  one  per  cent  of  fat  above  or  below  3.6  per 
cent  as  the  case  may  be.  Such  basic  price  to  be 
paid  in  the  200-210  mile  freight  zone,  subject  to 
the  freight  differentials  above  or  below  such  basic 
zone,  but  with  no  deductions  for  freight  zones  above 
400  miles. 

As  finally  agreed  upon,  the  price  of  whole  milk  for 
any  month  under  the  plan  was  based  upon  the 
average  price  of  butter  and  cheese  for  the  current 
month  ending  on  the  twentieth  day.  Thus  the 
price  for  whole  milk  to  be  paid  in  May  was  based  on 
the  price  of  butter  and  cheese  for  the  month  ending 

64 


MANUFACTURED  MILK  PRODUCTS 

on  April  20th,  and  for  October  on  the  butter  and 
cheese  price  for  the  month  ending  on  September  20th. 

One  disadvantage  of  this  plan  lies  in  the  fact  that 
in  the  spring  and  summer  months  when  the  prices  of 
butter  and  cheese  are  falling,  the  price  for  whole 
milk  for  the  subsequent  month  may  be  above  the 
price  prevailing  by  that  time  for  those  commodities, 
and,  conversely,  in  the  autumn  the  prices  thus  estab- 
lished will  tend  to  be  below  the  prices  of  butter  and 
cheese.  In  other  words,  under  this  plan  the  past  is 
determining  the  price  paid  for  milk  while  the  prices 
presently  received  for  milk  products — as  for  any 
other  commodity — is  influenced  also  by  the  prospects 
for  the  future.  Moreover,  the  price  to  an  extent 
must  always  be  above  the  actual  market  price  during 
the  months  of  maximum  production  and  below  the 
market  price  in  the  months  of  minimum  production, 
depending  upon  the  degree  of  fluctuation  in  butter 
and  cheese  prices.  Moreover,  the  plan  gives  no 
basis  for  including  the  value  of  milk  for  whole  milk 
consumption  other  than  the  stated  differentials. 

The  plan  is  artificial.  The  differential  to  be  added 
and  subtracted  as  given  in  Table  B  is  for  the  purpose 
of  correcting  this  artificiality.  But  that  this  dif- 
ferential always  fairly  represents  both  prevailing 
producing  and  market  facts  no  one  would  contend. 
Prices  are  determined  by  the  present  supplies  and 
estimates  of  future  demand  and  production.  In  the 
world  of  prices  the  past  is  a  good  guide,  but  it  is 
not  and  cannot  be  the  sole  determinant  in  fixing 
prices. 

5  65 


THE  PRICE  OF  MILK 

This  plan  after  trial  for  one  year  was  abandoned. 
The  chart  on  page  156  gives  the  results  in  price  to 
producers  as  compared  with  three  other  primary 
markets  for  the  months  it  was  tried. 

The  surplus  price  plans  now  in  use  in  the  Phila- 
delphia and  Baltimore  markets  are  discussed  in 
Chapter  VII. 

The  manufactured  products  are  the  forms  in  which 
whole  milk  is  economically  stored  during  flush  seasons 
against  seasons  of  scarcity.  The  development  of 
cold  storage  facilities  and  of  more  efficient  methods 
for  changing  whole  milk  into  forms  that  will  keep, 
stabilizes  the  prices  of  dairy  products  to  the  con- 
sumer and  provides  the  summer  producer  a  larger 
and  better  market.  Butter  and  cheese  have  usually 
been  made  in  localities  where  transportation  to 
market  has  been  poor,  and  hence  where  milk  would 
spoil  if  it  were  shipped  for  use  in  its  fresh  state. 
This  is  as  true  of  the  old  household  industry  that 
turned  out  butter  and  cheese,  as  of  the  newer  factory 
industry  that  has  sprung  up  in  the  last  half  century. 
Also,  countries  with  a  surplus  of  milk  for  the  needs 
of  their  population  have,  with  the  right  kind  of 
farmers'  associations  and  marketing  organization, 
turned  to  the  export  of  butter  and  cheese.  Holland 
and  Denmark  are  striking  examples  of  such  countries. 

It  is  through  the  manufactured  products,  too,  that 
milk  solids  produced  in  one  country  or  one  section 
of  a  large  country  are  made  available  to  other 
countries  and  to  all  sections  of  the  same  country. 
During  the  war  years  the  demand  of  other  countries 

66 


MANUFACTURED  MILK  PRODUCTS 

for  our  dairy  products  opened  a  market  never  before 
in  the  reach  of  our  dairymen,  on  a  profitable  basis, 
with  its  inevitable  result  upon  prices  for  dairy 
products  not  only  in  this  country  but  in  all  countries. 
The  quantities  and  values  of  our  exports  and  im- 
ports and  the  output  in  this  country  are  summarized 
in  the  succeeding  chapter,  where  the  interrelation  of 
international,  national  and  local  demand  and  supply 
and  their  effect  on  the  price  of  dairy  products  is 
discussed. 

A  comparatively  new  method  of  changing  the  form 
of  milk  so  that  it  will  not  spoil,  is  to  make  it  into 
condensed  or  evaporated  milk  or  milk  powders. 
Condensed  milk,  it  is  true,  has  been  found  to  have  a 
limited  market.  A  large  portion  of  the  population 
does  not  find  in  it  an  entirely  adequate  substitute 
for  fresh  milk.  But  notwithstanding  these  limita- 
tions, there  is  a  large  and  permanent  market  for  the 
product.  Not  only  is  the  domestic  market  avail- 
able, but  there  is  also  an  expanding  market  in  tropical 
or  frigid  countries  and  in  countries  not  adapted  to 
milk  production. 

The  following  table  shows  the  relative  amounts 
of  each  of  the  different  grades  of  condensed  and 
evaporated  milk  produced  in  the  United  States  in 
1916,  1917,  1918,  and  1919.  We  are  saving  more  of 
our  skimmed  milk.  The  percentage  of  increase  in 
the  use  of  imported  animal  and  vegetable  oils  is 
suggestive  of  the  increase  in  substitutes  for  butter 
with  a  relative  decline  in  the  production  of  butter, 
as  discussed  on  page  74. 

67 


THE  PRICE  OF  MILK 


PRODUCTION  OP  CONDENSED  AND  EVAPORATED  MILK  IN  THE 
UNITED  STATES  PROM  WHOLE  MILK,  1916-1919 

(Figures  are  in  round  thousands  of  Ibs.,  i.  e.,  000  omitted) 


Condensed  Milk. 

Evaporated  Milk. 

Total 

Per  Cent 

Year 

Condensed 

over 

Case. 

Bulk. 

Total. 

Case. 

Bulk. 

Total. 

and 
Evaporated. 

Previous 
Years. 

1916.... 

267,307 

20,767 

288,073 

524,273 

106,939 

631,212 

919,285 

1917.... 

280,958 

34,658 

315,616 

741,559 

186,609 

928,168 

1,243,784 

35 

1918.... 

411,225 

40,872 

452,097 

916,438 

183,612 

1,100,050 

1,552,147 

25 

1919.... 

573,044 

38,394 

611,437 

1,194,496 

77,514 

1,272,010 

1,883,447 

21 

FROM  SKIM  MILK 


1916.  .  .  . 

9,757 

32,993 

42,749 

3,526 

26,704 

30,329 

73,079 

1917.... 

7,832 

41,235 

49,067 

8,586 

32,348 

40,935 

90,002 

23 

1918.... 

8,653 

46,303 

54,957 

12,049 

56,782 

68,831 

123,787 

38 

1919.  .  .  . 

7,468 

65,377 

72,845 

3,626 

71,039 

74,665 

147,510 

19 

FROM  PART  OR  FULL  SKIMMED  MILK  MODIFIED  WITH  FOREIGN  FAT 


Year. 

Case 

(pounds). 

Bulk 
(pounds). 

Total 
(pounds). 

Increase  over 
Previous  Years 

(per  cent). 

1916 

12000 

14  134  712 

14  146  712 

1917                  

18,504 

17,487  064 

17,505  568 

24 

1918 

41  033  855 

7  591  182 

48  625  037 

178 

1919                     

62,262,221 

2,748,120 

65,010,341 

34 

Continued  on  next  page. 

Chart  No.  IX  on  page  70  gives  the  monthly 
variations  in  the  wholesale  price  of  extra  creamery 
butter  and  whole  milk  cheese  from  1913  to  1919 
inclusive.  The  prices  taken  are  the  average  for  the 
month.  It  will  be  noted:  (1)  Monthly  and  seasonal 
price  fluctuations  for  cheese  are  not  as  great  as  for 

68 


MANUFACTURED  MILK  PRODUCTS 

TOTAL  PRODUCTION  OF  CONDENSED  AND  EVAPORATED  MILK  (cont'd) 
(Figures  are  in  round  thousands  of  Ibs.,  i.  e.,  000  omitted.) 


Increase 

Relative 

Increase 

Relative 

Percent- 

Year. 

From  Whole 
and  Skim  Milk 
(pounds). 

over 
Previous 
Years 
(per 

Increase 
over 
1916 
(per 

Including 
Foreign  Fat 
(pounds). 

over 
Previous 
Years 
(per 

Increase 
over 
1916 
(per 

age  of 
Foreign 
Fat  of 
Total 
Produc- 

cent). 

cent). 

cent). 

cent). 

tion. 

1916 

992,364,000 

100 

1,006,510,712 

100 

0  014 

1917  

1,333,786,000 

34 

134 

1,351,291,568 

34 

134 

0.012 

1918  

1,675,934,999 

25 

168 

1,724,559,037 

27 

170 

0.028 

1919  

2,030,957,000 

21 

204 

2,095,967,341 

21 

208 

0.031 

butter.  (2)  High  and  low  price  months  vary  from 
year  to  year  and  are  not  always  the  same  months 
for  both  butter  and  cheese.  (3)  The  price  for  one 
product  affects  in  general  but  not  proportionally  nor 
immediately  the  price  of  the  other.  While  the 
average  between  the  lowest  price  at  which  butter 
and  cheese  went  into  storage  and  the  highest  price 
at  which  they  came  out  was  14.3  and  6.2  cents  per 
pound  respectively  for  this  seven-year  period,  the 
monthly  variations  in  these  differentials  (and  hence 
in  profits  and  risks)  were  marked.  (4)  The  margins 
were  larger  after  we  entered  the  war  than  in  the 
pre-war  period.  Thus  the  margin  for  butter  in  1918 
was  three  times  what  it  was  in  1919. 

These  facts  are  brought  out  in  the  table  on  page  71 
showing  the  lowest  and  highest  average  monthly 
prices  for  each  of  these  years  for  butter  and  cheese, 

69 


THE  PRICE  OF  MILK 


and  the  margin  between  the  highest  and  the  lowest 
prices  on  these  products  for  each  year. 

CHART  No.  IX. — AVERAGE  MONTHLY  WHOLESALE  PRICES  OP 

BUTTER1   AND   CHEESE,    1913-1919 


1913               1914              1915                1916              1917               1S1O              1919 

BUTTER 
CHEESE 

L*. 

2 

/ 
/ 

1 

*   1  a 

/ 

i\  / 
\  / 

/ 
/ 

^ 

j             j^ 

/ 

/ 

*\             / 
\            I 

4*'    - 

/VA.  /" 

2 

/ 

TN 

f     V 

c 

'    \                  / 
\               / 

1 

i       r 

A 

>                     r 

/ 

v^s*  3M 

»     g* 

\     r 

v 

V 

/v              . 

,  / 

Jto 

^ 

/^N/V 

^\x 

"\         ^ 

—  y      ^ 

^         / 

52 

V^ 

\S-s^— 

\r 

f  .      1913             Idl4-              1913             1916               1917             191«              1919        " 

The  placing  of  butter  in  cold  storage  begins  in  the 
United  States  about  April  1st  in  ordinary  years  and 
extends  through  August  into  September.  The  stor- 
age of  butter  preserves  its  quality  as  well  as  stabilizes 
price.  Statistics  of  the  cold-storage  holdings  of 
butter  in  1914  indicate  that  approximately  18  per 
cent  of  the  butter  placed  in  cold  storage  is  received 

»  The  quotations  taken  are  the  average  wholesale  prices  for  extra-creamery 
butter  at  Chicago  and  whole  milk  cheese  at  New  York  City.  The  quotations  on 
cheese  were  taken  for  New  York  because  not  available  for  1913  on  Chicago 
market. 

70 


MANUFACTURED  MILK  PRODUCTS 


MONTHS  OP  HIGH  AND  Low  PRICES  ON  BUTTER  AND  CHEESE, 
AND  MARGINS,  1913-1919 


BUTTER 


Year. 

Lowest  Price. 

Highest  Price. 

Margin  per 
Pound. 

Month. 

Price  per 
Pound. 

Month. 

Price  per 
Pound. 

1913 

July 
April 
August 
July 
July 
April 
June 

$0.262 
.245 
.243 
.275 
.375 
.400 
.515 

December 
January 
December 
November 
December 
December 
December 

$0.346 
.385 
.333 
.388 
.475 
.673 
.718 

$0.084 
.140 
.090 
.113 
.100 
.273 
.203 

1914                  

1915               

1916           

1917  

1918 

1919  

CHEESE 


1913        

July 

139 

January 

173 

034 

1914  

April 

138 

March 

171 

033 

1915             

August 

132 

December 

164 

032 

1916 

June 

150 

233 

noo 

1917  

January 

220 

March 

261 

041 

1918  

May 

223 

December 

863 

140 

1919 

February 

295 

February 

368 

073 

into  storage  in  May,  33  per  cent  in  June,  23  per 
cent  in  July  and  7  per  cent  in  August.  During  these 
four  months  81  per  cent  of  the  butter  stored  is 
delivered  into  storage.  In  1917,  78  per  cent  of  the 
total  butter  in  storage  went  in  during  the  months  of 
June  and  July.  Deliveries  out  of  storage  were  more 
gradual,  approximately  11  per  cent  being  removed 
in  August,  8  per  cent  in  September,  9  per  cent  in 
October,  12  per  cent  in  November,  15  per  cent  in 
December,  11  per  cent  in  January,  9  per  cent  in 

71 


CHART  No.  X.1 — COLD  STORAGE  HOLDINGS  OF  CREAMERY 
BUTTER  BY  MONTHS  FOR  STATED  PERIODS 

Base — 100 — Holdings  on  September  1st) 


»    s    5    £    s 

100     a      4     I     I     S 

^          ^r         ^1         M         H         r^         ^ 

100 
90 
80 
70 
60 
50 
40 
30 

20 
10 
0 

P           >            O           C          «O            U           U 

8     g     S     S  .     *     fl     S 

80 

70 

10 
0 

]      I 

D  Ten-  year  average  of 
Associated  Warehouses 

1    i 

|  Season  1.916-1917 

/      J 

•Season  1917  -19lS 

;      / 

/          / 

1       (      ''* 

/      '      i 

\           \                  r 

V 

jLil  ^ 

i  Chart  from  p.  9,  Bulletin  No.  776,  United  States  Department  of  Agriculture, 
March,  1919. 

72 


MANUFACTURED  MILK  PRODUCTS 

February,  11  per  cent  in  March  and  5  per  cent  in 
April.  The  deliveries  out  of  storage  during  each  of 
eight  months  (September  to  April,  inclusive)  exceed 
the  receipts  into  storage,  therefore  the  period  of 
storage  for  separate  lots  is  variable.  The  average 
length  of  storage  is  approximately  6.2  months. 

The  chart  on  the  opposite  page  pictures  the  sea- 
sonal variation  in  the  flow  of  creamery  butter  into 
and  out  of  cold  storage  for  (1)  the  ten-year  average 
(1907-1916  inclusive)  of  associated  warehouses  and 
for  the  seasons  of  (2)  1916-1917  and  (3)  of  1917- 
1918. 

The  differences  in  price  for  butter  and  cheese 
between  summer  and  winter  reflects  to  a  large 
extent  the  difference  between  the  price  to  the  farmer 
for  whole  milk  in  summer  and  in  winter.  In  other 
words,  so  far  as  butter  influences  the  prices  received 
for  whole  milk  in  winter,  it  tends  to  keep  that  price 
down  to  a  point  representing  the  cost  of  storing 
butter  for  six  months  plus  the  added  difference 
people  will  pay  to  get  fresh  butter  instead  of  cold 
storage  butter.  The  price  for  fresh  butter  usually 
runs  about  ten  cents  per  pound  above  the  price  for 
cold  storage  butter. 

To  store  butter  many  cold  storage  companies 
charged  before  the  war  12^  cents  per  cwt.  per  month 
for  less  than  carload  lots,  10  cents  per  cwt.  per 
month  for  carload  lots,  and  25  cents  per  cwt.  per 
month  for  small  lots  stored  for  thirty  days  or  less. 
The  customary  rate  with  small  storages  was  one- 
fourth  of  a  cent  per  pound  per  month.  The  approx- 

73 


THE  PRICE  OF  MILK 

imate  costs  for  interest  storage  and  insurance  for 
holding  butter  in  cold  storage  for  six  months  were 
estimated  at  pre-war  prices  as: 

Interest  on  100  pounds  butter  at  28  cents  for  six  months 
at  6  per  cent $0.84 

Storage  on  100  pounds  butter  at  10  cents  per  cwt.  per  month 
for  six  months 60 

Insurance  at  rate  of  42  cents  per  $100  for  six  months 1175 


Cost  per  100  pounds  for  six  months $1 . 5576 

Cost  per  100  pounds  for  one  month 2596 

These  costs  can  readily  be  re-figured  on  present 
day  prices. 

It  was  estimated  in  October  of  1918  that  the 
people  of  the  United  States  were  consuming  monthly 
60,000,000  pounds  of  creamery  butter,  20,000,000 
pounds  of  margarin,  1,500,000  pounds  of  process 
butter,  and  500,000  pounds  of  whey  butter,  a  total 
of  82,000,000  pounds.  It  was  estimated  that 
these  82,000,000  pounds  of  butter  and  butter 
substitutes  were  consumed  by  35,000,000  people,  the 
remainder  of  the  population  either  using  farm-made 
butter  or  being  too  young  to  consume  butter.  This 
is  a  consumption  of  2\  pounds  per  month  per  person, 
or  A  of  an  ounce  per  meal.  About  one-fourth  of 
this  consumption  consists  of  substitutes  for  butter. 
These  substitutes  at  that  time  were  priced  34  to  35 
cents  per  pound  as  compared  with  54  to  53  cents 
per  pound  for  storage  butter  and  70  cents  for  fresh 
butter. 

In  1912  butter  constituted  40  per  cent  of  the  total 
fat  production  in  the  United  States,  but  in  1917  it 

74 


MANUFACTURED  MILK  PRODUCTS 

was  only  27  per  cent  of  the  total.  In  1912,  vegetable 
oils  formed  but  35  per  cent  of  the  fat  produced  and 
animal  fats  other  than  butter  25  per  cent;  by  1917 
the  fats  produced  from  these  sources  had  increased 
to  42  per  cent  and  31  per  cent  respectively. 


TOTAL  PRODUCTION  OF  FATS  AND  OILS  IN  THE  UNITED  STATE s1 


Product. 

1912 
(pounds). 

1914 

(pounds). 

1916 

(pounds). 

1917 
(pounds). 

Vegetable  oils*  
Animal  fats5 

1,966,613,000 
1,351,867,000 

2,338,185,000 
1,596,157,000 

2,236,507,000 
1,898,774,000 

2,159,335,000 
1,636,451,000 

Total  

3,318,480,000 

3,934,342,000 

4,135,281,000 

3,795,786,000 

Butter2  (farm)  

1,660,000,000 

1,613,736,000 

879,610,000 

733,222,000 

Butter2  (factory)  

581,000,0003 

652,382,000 

609,398,000 

636,278,000 

Total  

2,241,000,000 

2,266,118,000 

1,489,008,000 

1,369,500,000 

Grand  total  

5,559,480,000 

6,200,460,000 

5,624,289,000 

5,165,286,000 

And  this  increase  in  the  use  of  substitutes  for 
butter  has  been  accompanied  by  a  decrease  in  the 
per  capita  production  of  butter  and  cheese. 

*  The  figures  given  in  this  table  were  compiled  by  the  Fats  and  Oils  Division  of 
the  United  States  Food  Administration  from  a  careful  survey  made  during  1917 
and  1918.     P.  3,  Bulletin  No.  769,  United  States  Department  of  Agriculture, 
February,  1919. 

'These  figures  represent  the  average  butter   fat  content  of  butter,  or  83  per 
cent  of  the  total  butter  produced. 
1  Estimated. 

*  Vegetable  oils  include  castor,  cocoanut,  coquita,  corn,  cottonseed,  grapeseed, 
linseed,   mustard  seed,   olive,  palm  kernel,  peanut,  rapseed,  sesame,  shea  nut, 
soy  bean,  sunflower  seed,  all  other  vegetable  oils. 

8  Animal  fats  include,  bone  grease,  cod  and  cod  liver  oil,  garbage  grease,  herring 
oil,  lard,  menhaden  oil,  miscellaneous  oils,  neat's  foot  oil,  neutral  lard,  oleo  stock, 
packers'  and  Tenderers'  greases,  sperm  oil,  tallow,  whale  oil,  wool  grease  and 
recovered  grease,  all  other  fish  oils. 

75 


THE  PRICE  OF  MILK 


PER  CAPITA  PRODUCTION  OF  BUTTER  AND  CHEESE,  1870-1919 


Production 

Per  Capita 

Production 

Per  Capita 

Year. 

Population. 

of  Butter1 

Production 

of  Cheese 

Production 

(pounds). 

(pounds). 

(pounds). 

(pounds). 

1870    .   .   . 

28,558,371 

514,092,683 

13  3 

162,927,382 

4.2 

1880  

50,155,783 

806,672,071 

16.1 

243,157,850 

4.8 

1890  

62,947,714 

1,205,446,606 

19.1 

256,749,383 

4.1 

1900  

75,994,575 

1,491,752,602 

19.6 

298,344,639 

3.9 

1910  

91,972,266 

1,619,415,263 

17.6 

320,532,181 

3.5 

1919  

106,352,191 

1,549,000,000 

14.5 

378,000,000 

2.4 

The  table  on  the  next  page  gives  the  average  annual 
wholesale  prices  of  the  vegetable  and  animal  fats 
competing  with  butter  from  1913  to  1918,  with  the 
percentage  of  increase  in  the  wholesale  price  of  each 
for  1918  over  1913.  Butter  increased  59  per  cent 
as  compared  with  175  per  cent  in  cottonseed  oil, 
196  per  cent  in  corn  oil  and  157  per  cent  in  lard. 
Butter  increased  the  least  of  any  except  cocoanut  oil. 
The  great  bulk  of  cottonseed,  corn  and  peanut  oils 
are  used  for  food.  Cottonseed  oil  is  used  especially 
for  lard  substitutes  and  for  oleomargarin.  One- 
half  of  the  available  supply  of  cocoanut  and  soya 
bean  oils  are  used  in  making  soap.2 

Producers  of  the  different  animal  and  vegetable 
fats  have  been  competing  in  price  for  markets. 
Butter,  as  a  consequence,  did  not  increase  in  price 
as  rapidly  as  [did  its  substitutes.  On  page  92  it  is 
pointed  out  that  the  imports  for  the  substitutes  for 

»  From  Statistical  Abstract  for  year  preceding  decennial  year. 

2  It  is  interesting  to  note  here  in  passing  that  the  average  annual  wholesale 
price  of  Ivory  Soap  increased  218  per  cent  from  1913  to  1918  and  the  size  of  the 
bar  decreased  from  time  to  time  in  the  bargain.  The  price  per  box  was  $3.11 
in  1913  as  compared  with  $9.91  in  1918. 

76 


MANUFACTURED  MILK  PRODUCTS 


butter  increased  from  about  1,000,000  pounds  in 
1913  to  4,000,000  pounds  in  1919,  and  on  page  68 
that  the  percentage  of  condensed  or  evaporated  skim 
milk  modified  with  foreign  fat  increased  from  1.4 
per  cent  of  the  total  evaporated  and  condensed  milk 
produced  in  this  country  in  1916  to  3.1  per  cent  in 
1919. 

THE  AVERAGE  ANNUAL  WHOLESALE  PRICES  BY  YEARS  OF 

VEGETABLE  AND  ANIMAL  FATS  COMPETING  WITH 

BUTTER,  AND  THE  PERCENTAGE  OF 

INCREASE  IN  EACH  FOR  1918 

OVER  1913 


Butter 

Cotton- 
seed 

Cocoa- 
nut 

Lard 

Substi- 

Corn 

Cream- 

Oleomar- 

Soya 
Bean 

Tallow, 

Year. 

Oil, 
per 
Pound. 

Oil, 
per 
Pound. 

tutes, 
per 
Pound. 

Oil, 
per 
Barrel. 

ery 
Extra, 
per 
Pound. 

garine 
per 
Pound. 

Oil, 
per 
Pound. 

per 
Pound. 

1913  

$0.0725 

$0.1199 

$0.0876 

$0.0607 

$0.3104 

$0.1775 

$0.0612 

$0.0634 

1914. 

0663 

1220 

0828 

0617 

2873 

1758 

0630 

0635 

1915  

.0681 

.1231 

.0821 

.0630 

2836 

.1733 

0625 

.0633 

1916  

.1064 

.1513 

.1275 

.0960 

.3254 

.1917 

.0891 

.0927 

1917  

.1535 

.1706 

.1779 

.1452 

.4111 

.2700 

.1421 

.1486 

1918  

.1992 

.1810 

.2257 

.1803 

.4946 

.3100 

.1828 

.1713 

Per  Cent 
Increase, 

1918  over  1913. 

175 

50 

157 

196 

59 

74 

198 

170 

The  production  of  oleomargarin  in  the  United 
States  increased  72  per  cent  from  1918  to  1919. 
)uring  this  year  our  production  of  butter  increased 
3ut  4  per  cent.  The  production  of  oleomargarin 
luring  these  two  years  was  from  the  following 
3urces: 

77 


THE  PRICE  OF  MILK 

PRODUCTION  OF  OLEOMAKQARIN  (POUNDS) 


1918. 

1919. 

Oleomargarin  (uncolored),  animal  and  vegetable  oil  

255,196,592 

214,759,689 

Oleomargarin  (uncolored),  exclusively  vegetable  oil  

88  861  472 

132  906  154 

Oleomargarin  (uncolored),  exclusively  animal  oil 

3  306  671 

3  391  206 

Oleomargarin  (colored),  animal  and  vegetable  oil  . 

7  056  442 

9  302  681 

Oleomargarin  (colored),  exclusively  vegetable  oil  
Oleomargarin  (colored)  exclusively  animal  oil 

112,494 
1  002  864 

9,792,694 
1  165  362 

Total                                                     

215  536,535 

371  317,786 

Chart  No.  XI  shows  by  months  the  relationship 
between  the  amount  of  butter,  of  cheese  and  of 
condensed  and  evaporated  milk  produced  in  this 
country,  the  quantities  of  butter  and  cheese  in  stor- 
age, the  stock  of  condensed  and  evaporated  milk  on 
hand,  the  quantities  of  each  of  these  three  products 
exported,  the  average  price  received  for  all  grades 
of  butter  and  of  cheese  exported,  the  wholesale  price 
of  extra  creamery  butter,  of  American  cheese  and 
(per  case,  16-oz.  cans)  of  condensed  milk,  all  at  New 
York  City.  The  domestic  retail  price  for  butter  and 
cheese  is  taken  for  New  York  City.  Production, 
stocks  on  hand  and  in  storage,  and  quantities  ex- 
ported ought  to  be  the  chief  factors  in  measuring 
the  effect  of  domestic  and  foreign  supply  and  demand 
upon  prices. 

A  few  of  the  points  to  be  gleaned  from  the  chart 
are:  1.  Exports  are  relatively  not  a  large  proportion 
of  the  total  production  of  butter  and  cheese,  but  are 
of  condensed  and  evaporated  milk.  2.  The  seasonal 
fluctuations  in  the  wholesale  prices  for  these  three 

78 


CHART  No.  XL— THE  RELATION  OP  PRICES  TO  PRODUCTION, 
EXPORTS  AND  STORAGE  STOCKS  OP  BUTTER,  OF  CHEESE 

AND  OP  CONDENSED  MILK  AND  EVAPORATED  MILK 
(Prices  are  in  Cents  per  Pound.     Quantities  are  in  Millions  of 
Pounds.    (For  sources  see  page  84.) 


1SZO_ 


•PRODUCTION 


STORAGE 


EXPORTS 


-EXPORT  PRICE 


•RETAIL     PRICE -^-WHOLESALE      PRICE 


£ 


MILK 


p; 


V 


A 


/\ 


N/ 


I  BIO 


1919 


1920 


79 


THE  PRICE  OF  MILK 

products  for  this  period  were  most  marked  for  butter, 
less  for  condensed  milk  and  but  little  for  cheese. 
3.  Seasonal  production,  however,  varied  most  for 
cheese,  less  for  butter  and  least  for  condensed  milk, 
and  neither  high  nor  low  production  were  in  the 
same  months.  The  lowest  production  of  cheese  was 
8,500,000  pounds  in  February  of  1918;  the  highest 
production,  47,000,000  pounds  in  June  of  1919. 
Butter  production  was  lowest  (42,300,000  pounds) 
in  February  of  1918  and  highest  (119,300,000  pounds) 
in  June  of  the  next  year.  The  low  production  month 
(102,000,000  pounds)  for  condensed  and  evaporated 
milk  was  November  of  1918,  the  high  month  (221,- 
000,000  pounds)  in  the  following  May.  4.  The  whole- 
sale price  for  these  three  products  were  lowest  and 
highest  in  the  following  months:  Butter,  April,  1918 
(4.15),and  December,  1919  (7.35) ;  cheese,  April,  1918 
(2.25),  and  January,  1919  (3.68);  condensed  and 
evaporated  milk,  June  (4.50)  and  December  (6.87) 
of  1918.  5.  The  high  and  low  months  for  storage 
stocks  were:  Butter,  May,  1918  (9,500,000  pounds), 
and  September,  1919  (131,000,000  pounds);  cheese, 
June,  1918  (22,000,000  pounds),  and  October,  1919 
(81,000,000  pounds);  condensed  and  evaporated 
milk  (stocks  on  hand),  March,  1918  (105,000,000 
pounds),  and  January,  1918  (515,000,000  pounds). 
6.  The  quantities  exported  reached  their  lowest  and 
highest  in  August,  1918  (337,000  pounds),  and  April, 
1919  (8,400,000  pounds),  for  butter;  in  October, 
1918  (549,000  pounds),  and  in  May,  1918  (13,000,000 
pounds),  for  cheese;  and  in  February  (29,000,000 

80 


MANUFACTURED  MILK  PRODUCTS 

pounds)  and  June,  1919  (114,000,000  pounds),  for 
condensed  milk.  7.  Storage  stocks  increased  as 
prices  went  down.  8.  The  retail  price  of  butter  and 
cheese  responded  promptly  in  this  period  to  rises 
and  declines  in  wholesale  prices. 

An  example  of  the  effect  of  changes  in  demand  is 
shown  in  the  trend  of  prices  following  January  of 
1918.  In  that  month  stocks  of  condensed  and 
evaporated  milks  reached  the  unprecedented  total 
of  515,000,000  pounds.  In  the  early  days  of  1918 
the  success  of  German  submarines  and  the  adoption 
of  the  military  program  that  won  the  war  made  it 
impossible  to  get  the  cargo  space  to  export  either 
the  quantities  of  case  goods  needed  or  available. 
Consequently  stocks  were  higher  in  July  of  1918 
than  in  July  of  1917  and  prices  of  milk  to  the  farmer 
in  this  country  had  to  be  reduced.  Beginning  with 
July  of  1918,  however,  case  goods,  as  did  butter  and 
cheese,  moved  more  rapidly  and  prices  to  the  farmer 
rose  again,  only  to  fall  after  the  beginning  of  1919, 
because  the  civil  marketing  channels  of  Europe  had 
not  as  yet  begun  to  absorb  our  dairy  products  in 
proportion  to  the  demand  that  had  been  made  by 
the  military  authorities. 

Shortly  after  the  armistice  came  closer  buying  by 
consumers  because  of  the  outlook  for  unemploy- 
ment. Butter  exports  did  not  move  as  rapidly  as 
in  preceding  months.  The  price  to  the  farmers  had 
gone  up  in  the  autumn  of  1918  to  unprecedented 
heights.  People  would  not  consume  butter  in  usual 
quantities  at  the  prevailing  prices  and  the  consump- 

e  81 


THE  PRICE  OF  MILK 

tion  of  butter  substitutes  went  up  because  cheaper. 
The  result  was  that  in  the  early  months  of  1919  the 
retail  price  of  butter  dropped  ahead  of  the  wholesale 
price  and  as  much  fresh  butter  was  going  into  cold 
storage  as  was  being  taken  out.  The  outlook  did 
not  promise  any  change  and  hence  butter  prices 
first  and  then  prices  for  milk  to  the  farmer  went  down 
in  the  early  months  of  1919,  though  feed  and  labor 
costs  were  higher  than  ever  before. 

The  effect  of  dried  milk  powders  uponthemaximum 
price  to  dairymen  selling  on  the  whole  milk  market 
is  discussed  in  the  succeeding  chapter.  It  remains 
here  to  point  out  the  relation  between  the  use  of  ice 
cream  and  the  price  of  whole  milk  to  the  dairyman. 

There  was  a  time  when  the  making  of  ice  cream 
was  almost  exclusively  a  household  industry.  But 
the  growing  popularity  of  this  food  has  tended  to 
concentrate  its  manufacture  in  large  plants  on  a 
commercial  basis.  This  has  standardized  its  com- 
position and  rendered  its  quality  uniform,  which  in 
turn  has  increased  the  appetite  for  it.  Because  of 
the  chemistry  of  ice  cream  manufacture,  large  scale 
production  has  developed  economies  which  have  kept 
prices  down  and  made  the  product  available  to  all. 
Many  a  fortune  has  been  made  through  the  inte- 
gration of  small  milk  manufacturing  industries;  and 
a  wider  market  has  been  opened  to  the  producer,  a 
market  that  in  price  possibilities  ranks  second  only 
to  that  of  milk  for  whole  milk  consumption.  We 
manufactured  122,900,106  gallons  of  ice  cream  in 
this  country  in  1918  and  127,840,204  gallons  in  1919. 

82 


MANUFACTURED  MILK  PRODUCTS 

But  it  is  not  profitable  commercially  to  manufac- 
ture ice  cream  entirely  out  of  whole  milk  and  cream. 
To  the  butter  fat  solids  in  cream,  the  milk  solids  not 
fat  are  added  from  condensed  skim  milk  or  from 
milk  powders.  Inasmuch  as  cream  can  be  kept  in 
cold  storage  for  at  least  six  months  without  a  ma- 
terial increase  in  the  bacteria  count  (if  sweetened  as 
required  for  ice  cream  it  can  be  kept  much  longer), 
and  since  milk  solids  in  manufactured  form  can  be 
kept  indefinitely,  the  making  of  ice  cream  in  the 
average  dairy  section  becomes  a  question  of  the  most 
economical  use  of  storage  products  with  regard  to 
the  whole  milk  supply  of  the  moment.  It  does  not 
pay  to  use  fresh  milk  and  cream  at  prices  much  above 
the  price  of  the  storage  products.  Moreover,  ice 
cream  itself  can  be  stored  for  a  week  or  two,  though 
it  deteriorates  in  quality.  Ice  cream  may  be  made 
in  New  York  City  from  condensed  skim  milk  from 
Seattle,  cream  from  Wisconsin,  salt  from  Kansas 
and  ice  from  Maine.  It  is  in  no  sense  now  necessarily 
a  local  product.  The  output  of  the  best  dairy 
regions  the  world  over  determine  the  price  of  its 
constituent  milk  elements. 

Ice  cream  is  not  alone  a  sufficient  outlet  for  the 
surplus  of  the  whole  milk  dealer.  The  maximum 
of  milk  production  comes  in  June,  the  maximum  of 
ice  cream  production  in  July  or  August.  Indeed,  if 
August  be  dry  and  hot  and  the  flies  bad,  milk  pro- 
duction may  go  down  as  rapidly  as  ice  cream  con- 
sumption goes  up.  One  or  more  of  the  other  methods 
of  manufacturing  milk  products  must  be  used  to 

83 


THE  PRICE  OF  MILK 

consume  economically  the  milk  received  by  a  dis- 
tributor in  excess  of  his  needs  for  the  whole  milk 
trade. 

In  1918  a  new  machine  was  successfully  put  on 
the  market  in  considerable  quantities  by  means  of 
which  the  " cream"  for  ice  cream  could  be  made  by 
homogenizing  sweet  butter  and  skim  milk  powders 
in  proper  proportions  with  water.  By  this  process 
the  mixture  was  emulsified  and  the  ingredients 
thoroughly  blended  into  a  product  of  the  much 
desired  "velvety"  consistency.  The  result  is  that 
the  small  ice  cream  parlor  can  now  keep  the  ingredi- 
ents for  ice  cream  on  its  shelves  and  use  just  the 
portion  needed,  thus  giving  the  small  manufacturer 
an  opportunity  in  competition  with  the  large  and, 
by  increasing  the  use  of  manufactured  milk  products, 
decrease  the  necessary  seasonal  dependence  upon 
whole  milk  and  cream.  This  process,  however,  has 
not  proved  sufficiently  economical  and  practical  to 
affect  the  tendency  toward  large  scale  manufacture 
of  ice  cream. 

The  making  of  whole  milk  from  sweet  butter  and 
skimmed  milk  powders  is  discussed  in  Chapter  VII. 

In  these  and  other  ways  will  one  use  of  whole  milk 
affect  the  price  of  another  use  of  whole  milk.  The 
price  forces  at  work  are  each  mobile  and  powerful, 
yet  responsive  one  to  the  other. 


The  production  statistics  and  storage  stocks  for  Chart  No.  XI  are  compiled 
from  the  monthly  production  reports  of  the  United  States  Bureau  of  Markets, 
the  exports  and  export  prices  from  the  Monthly  Summary  of  Foreign  Commerce 
of  the  United  States,  and  the  wholesale  and  retail  prices  from  the  Bureau  of  Labor 
Statistics. 

84 


CHAPTER  IV 

The  Price  Interdependence  of  Local  Primary 
and  International  Markets 

The  competition  between  dairying  areas  in  dif- 
ferent countries  has  been  named  as  one  of  the  factors 
strongly  influencing  the  price  of  milk. 

The  mapand  chart  facing  on  page  86  depict  the  total 
number  of  milk  cows,  the  number  per  square  mile, 
and  the  number  per  1000  population,  preceding  the 
war,  in  the  United  Kingdom,  Sweden,  Austria-Hun- 
gary, France  and  the  German  Empire. 

The  distribution  of  milk  cows  in  Canada,  the 
total  number,  and  the  number  per  1000  population 
for  the  provinces  notable  for  the  production  of  dairy 
products  is  given  in  the  map  on  page  86. 

Facing  page  94  is  a  map  showing  the  distribution 
of  dairy  cows  in  the  United  States,  together  with  a 
chart  showing  the  relative  number  of  animals,  the 
percentage  of  all  farms  reporting  milk  cows  and  the 
value  per  animal  in  dollars  for  the  ten  leading  dairy 
states  and  for  the  United  States  as  a  whole,  for 
the  year  1910. 

The  world's  greatest  dairying  areas  are  (1)  the 
region  along  the  northwest  coast  of  Europe  where 
climatic  conditions  favor  rich  pastures,  (2)  northern 
Italy,  (3)  in  the  United  States  the  so-called  Elgin 
district  in  northern  Illinois  and  the  adjoining  counties 
of  southern  Wisconsin,  with  a  scarcely  less  important 

85 


THE  PRICE  OF  MILK 


PRICE  INTERDEPENDENCE  OF  MARKETS 

center  in  central  New  York  and  northwestern  Ver- 
mont, and  (4)  the  St.  Lawrence  lowlands  and  the 
peninsula  of  Ontario  in  Canada.  The  intensive 
dairy  districts  in  northern  Italy  and  along  the 
northern  coast  of  France,  the  Netherlands  and  Den- 
mark have  from  two  to  three  times  as  many  cows 
per  square  mile  as  the  densest  dairy  regions  in  the 
United  States. 

Why  these  dairy  regions  are  where  they  are  is  a 
fact  pertinent  to  price.  It  is  because  of  low  produc- 
tion costs  in  the  first  place  and  because  of  nearness 
to  markets  in  the  second.  There  are  of  course 
other  reasons  such  as  reputation  for  a  special  dairy 
product.  Denmark's  reputation  for  butter  causes 
most  of  her  milk  supply  to  go  into  butter,  "  while  the 
Netherlands  with  somewhat  better  climatic  con- 
ditions and  transportation  facilities  converts  a  con- 
siderable portion  of  her  milk  supply  into  cheese,  for 
which  a  reputation  has  been  established/'  say  the 
authors  of  the  Geography  of  the  World's  Agriculture. 
But  in  general  the  dairy  industry  of  northern  Europe 
flourishes  because  of  favorable  conditions  of  grass 
production  and  proximity  to  large  markets.  Pasture 
and  dairying  are  even  more  closely  connected  in 
Europe  than  in  the  United  States.  In  Germany, 
butter  is  produced  in  the  northern  lowlands  and 
cheese  in  the  rough  southern  hill  sections,  especially 
in  Bavaria.  In  Great  Britain  about  70  per  cent  of 
the  milk  produced  is  consumed  as  whole  milk,  and 
in  Germany  about  43  per  cent1  as  compared  with 

1  Geography  of  the  World's  Agricultuie,  U.  S.  Dept.  of  Agri.,  1917,  p.  119. 

87 


THE  PRICE  OF  MILK 

43.1  per  cent  in  the  United  States  and  27  per  cent 
in  Canada,  on  pre-war  standards.  The  dairy  indus- 
try in  the  Mediterranean  countries  is  relatively  un- 
important. In  Greece  there  are  "not  more  than 
4000  cows,  mainly  near  Athens/'  The  irrigated  hay 
regions  of  the  Italian  Alps  and  the  Po  Valley  are 
important  dairy  regions. 

The  sections  of  large  milk  production  in  the 
United  States,  noted  above,  are  in  areas  where  the 
cool  summer  climate  favors  the  production  of  dairy 
products  of  high  qualities,  and  where  the  best  use 
of  corn  is  for  silage.  The  climatic  conditions  and 
rainfall  make  good  pasture  and  hay,  the  most 
profitable  market  for  which  is  in  dairy  products. 
Another  milk  area  lies  in  the  cool  clay  soils  of  north- 
ern Ohio,  from  which  comes  the  largest  share  of  the 
milk  for  the  Pittsburgh  and  Cleveland  markets.  The 
butter  producing  area  in  northwestern  Vermont  lies 
in  land  adapted  to  spring  and  summer  butter  pro- 
duction rather  than  to  any  other  use. 

These  areas,  peculiarly  fitted  for  dairy  farming,  are 
competing  for  the  world's  best  markets  in  storage 
dairy  products. 

During  the  war  period  the  scarcity  of  dairy  feeds, 
especially  the  concentrates,  caused  a  decline  in  the 
herds  of  the  European  countries.  The  number  of 
dairy  cows  in  Great  Britain  decreased  by  1.7  per  cent 
from  1914  to  June  30, 1918,  the  number  on  the  latter 
date  being  4,548,000.  The  number  of  dairy  cows 
in  France  decreased  from  7,794,270  on  December  31, 
1914,  to  6,238,690  on  June  30,  1917,  a  decrease  of 

88 


PRICE  INTERDEPENDENCE  OF  MARKETS 

around  20  per  cent.  The  dairy  herds  in  Italy  de- 
creased during  the  war  about  14  per  cent.  The 
facts  as  to  enemy  countries  are  not  now  available. 
But  we  do  know  that  the,  supply  of  whole  milk  for 
Berlin  was  220,000  liters  in  June  of  1919,  as  compared 
with  400,000  liters  in  July,  1917.  Germany  now 
has  but  four-fifths  of  the  milk  cows  she  had  before 
the  war.  Because  the  dairy  cows  not  killed  were 
poorly  fed,  the  total  output  of  the  dairy  herds  in 
these  warring  countries  decreased  more  rapidly  than 
the  numbers.  Moreover,  it  may  take  considerable 
time,  at  good  feeding,  to  get  these  herds  back  to 
normal.  Until  they  are  back  to  normal,  the  United 
States  can  expect  to  supply  Europe  with  decreasing 
amounts  of  dairy  products.  To  the  extent,  how- 
ever, that  European  herds  in  the  future  may  rely 
on  feeds  imported  from  the  United  States,  it  would  be 
cheaper  to  transport  dairy  products  to  Europe  than 
it  would  be  to  transport  feeds.  Wages  of  laborers 
and  standards  of  living  on  American  and  European 
farms  will  determine  whether  our  nation  is  to  be  the 
greatest  dairy  area  of  the  world. 

These  conditions  in  Europe  gave  to  our  producers 
during  the  war  period  a  large  and  expanding  market 
for  our  dairy  products. 

We  exported  over  nine  times  as  much  butter  and 
cheese  in  1919  as  in  1913  and  about  forty-five  times 
as  much  condensed  milk.  From  1908  to  1919  we 
exported  more  butter  than  we  imported,  save  for 
1914.  In  1880  the  United  States  was  the  greatest 
cheese-exporting  country  in  the  world.  In  1918 

89 


THE  PRICE  OF  MILK 

five  countries  each  exceeded  the  United  States  in 
cheese  exports.  Just  before  the  war  we  were  con- 
suming all  the  cheese  we  produced  and  importing 
one-tenth  of  the  exports  from  all  countries.1 

The  net  balance  of  trade  in  dairy  products  (1913- 
1919)  has  been  well  presented  by  the  Dairy  Division 
of  the  United  States  Department  of  Agriculture  in 
Chart  No.  XII.  In  this  chart  the  differences  between 
exports  and  imports  has  been  expressed  in  terms  of 
whole  milk  for  butter,  cheese  and  condensed  milk, 
assuming  21,  10  and  2^  pounds  of  whole  milk, 
respectively,  to  one  pound  of  butter,  cheese  and 
condensed  milk.  The  term  "condensed  milk"  in- 
cludes evaporated  and  skim  condensed  milk.  The 
year  1913  was  normal  for  pre-war  times.  Our  pro- 
duction was  low  in  1914. 


CHART  No.  XII. — BALANCE  OF  TRADE  IN  DAIRY  PRODUCTS, 
UNITED  STATES,  1913-19192 

(In  Terms  of  Whole  Milk) 


^ee  "Trend  of  the  Cheese  Industry",  United  States  Department  of  Agricul- 
ture, Circular  No.  71,  November,  1919. 
•  Year  ending  June  30th. 

90 


PRICE  INTERDEPENDENCE  OF  MARKETS 


EXPORTS,  IMPORTS  AND  BALANCE  OP  TRADE  IN  POUNDS  IN 

BUTTER  AND  CHEESE  AND  EXPORTS  OP  CONDENSED 

MILK,  1908-1919 


BUTTER. 


Year. 

Exports. 

Imports. 

Balance  of  Trade 

1908                            

6,463,061 

780,608 

5,682,453 

1909           

5,981,265 

646,320 

5,334,945 

1910        

3,140,545 

1,360,245 

1,780,300 

1911               

4,877,797 

1,007,826 

3,869,971 

1912               

6,092,235 

1,025,668 

5,066,567 

1913 

3,585,600 

1,162,253 

2,423,347 

1914                     

3,693,597 

7,842,022 

-4,148,425' 

1915           

9,850,704 

3,828,227 

6,022,477 

1915                               

13,487,481 

712,998 

12,774,483 

1917              

26,835,092 

523,573 

26,311,519 

1918    

17,735,966 

1,805,925 

15,930,041 

1919                 

33,739,960 

4,131,469 

29,608,491 

Year. 

- 

CHEESE. 

CONDENSED 

MlLK.2 

Exports. 

Imports. 

Balance  of  Trade. 

Exports. 

1908  

8,439,031 

32,530,830 

-24,091,  7991 

1909        

6,822,842 

35,548,143 

—  28,725,301* 

1910  

2,846,709 

40,817,524 

-37,970,815* 

13,311,318 

1911 

10,366,605 

45,568,797 

—  35.202.1921 

12,180,445 

1912  

6,337,559 

46,542,007 

—  40.205.4481 

20,642,738 

1913 

2,599,058 

49,387,944 

~  46.788.8861 

16,525,918 

1914  

2,427,577 

63,784,313 

-61.356.7361 

16,209,082 

1915                  .   . 

55,362,917 

50,138,520 

5,224,397 

37,235,627 

1916  
1917 

44,394,301 
66,050,013 

30,087,999 
14,481,514 

14,306,302 
51,568,499 

159,577,620 
259,141,231 

1918  

44,303,076 

9,839,305 

34,463,771 

528,759,232 

1919  

18,794,853 

2,442,306 

16,352,547 

728,740,509 

*  Imports  exceeded  exports. 

*  Includes  evaporated  and  condensed  skim  milk.     In  1919  there  were  imported 
20,183,723  pounds  of  condensed  milk.     In  1918,  2,591,553  gallons  of  fresh  milk 
were  imported. 

91 


THE  PRICE  OF  MILK 


These  large  exports  are  compared  with  production 
and  storage  stocks  in  their  relation  to  price  in  the 
chart  on  page  79.  Their  effect  was  in  large  part 
offset  by  the  increase  in  the  production  of  substi- 
tutes for  butter  as  shown  on  page  78.  Not  only 
did  domestic  production  of  butter  substitutes  in- 
crease as  the  price  of  dairy  products  advanced,  but 
imports  of  those  substitutes  also  increased  in  1919 
over  any  previous  year  since  1908  except  the  year 
1914. 

IMPORTS  OP  SUBSTITUTES  FOR  BUTTER  AND  CHEESE,  1908-1919 


For  Year  Ending  June  30th. 

Substitutes  for 
Butter 
(pounds). 

Substitutes  for 
Cheese 
(pounds). 

1908  

780  608 

32,530  830 

1909 

646  320 

35  548  143 

1910  

1,360  245 

40  817,524 

1911  

1,007,826 

45,568,797 

1912  

1,025,668 

46,542,007 

1913 

1  162  253 

49  387  944 

1914  .       ... 

7,842,022 

63,784,313 

1915 

3,828  227 

50,138  520 

1916  

712,998 

30,087,999 

1917    

523,573 

14,481,514 

1918 

1  805  925 

9  839  305 

1919    ....                                  

4,131,469 

2  442,306 

By  saving  milk  otherwise  wasted  on  the  farm  or 
in  the  plant,  by  conserving  and  by  increasing  pro- 
duction, we  changed  from  an  importing  to  an  export- 
ing country. 

Our  dairymen  can  keep  these  foreign  markets  only 
if  the  wages  paid  to  industrial  populations  in  other 
countries  will  allow  the  wage  earners  of  those  coun- 

92 


PRICE  INTERDEPENDENCE  OF  MARKETS 

tries  to  buy  our  dairy  products  at  prices  satisfactory 
to  the  living  standard  of  producers  in  our  dairy 
regions.  Since  the  freight  on  dairy  products  is  less 
than  on  feeds,  those  who  have  an  abundance  of 
feeds  close  at  hand  ought  to  compete  certainly  with 
dairy  regions  which  must  import  feeds,  provided, 
however,  that  milk  can  be  produced  as  economically 
in  the  favorable  areas  in  this  country  as  in  areas 
specially  adapted  to  dairying  in  other  countries. 
Under  modern  transportation  facilities  nearness  of 
market  is  not  so  vital  in  international  price  com- 
petition as  climatic  and  soil  conditions  on  the  one 
hand,  and  land  values,  due  to  other  alternatives,  and 
to  agricultural  wages  and  living  standards,  on  the 
other  hand.  An  international  movement  to  raise 
the  living  standards  of  farmers  in  those  milk  pro- 
ducing regions  where  living  standards  are  lowest 
concerns  the  welfare  of  milk  producers  everywhere. 
Otherwise,  milk  producers  in  countries  of  high  living 
standards  will  find  themselves  under  the  increasing 
necessity  of  competing  with  low  standard  labor  as 
the  rivalry  for  world  markets  intensifies. 

An  examination  of  the  map  facing  page  93  showing 
the  distribution  of  dairy  cattle  in  the  United  States 
and  of  the  map  on  page  26  showing  the  receipts 
from  the  sale  of  dairy  products  will  reveal  that  there 
are  in  this  country  about  nine  important  primary 
milk  markets:  Chicago,  New  York,  Boston,  Phila- 
delphia, Pittsburgh  (including  Cleveland),  Seattle, 
San  Francisco,  Detroit,  and  Louisville,  Ky.  There 
are  no  exact  boundaries  between  these  markets,  but 

93 


THE  PRICE  OF  MILK 

each  is  sufficiently  distinct  to  have  its  own  climatic, 
soil  and  marketing  conditions  and  producing  habits. 
The  rather  uniform  distribution  of  cows  in  other 
parts  of  the  United  States  indicates  that  they  are 
kept  primarily  to  supply  domestic  and  local  needs. 
In  these  nine  primary  market  regions  milk  is  pro- 
duced far  beyond  domestic  and  local  needs. 

Outside  the  seasons  of  surplus  production,  the 
price  to  the  producer  for  the  milk  sold  for  whole 
milk  purposes  in  each  of  these  primary  markets  will 
vary  more  or  less  from  the  price  in  other  primary 
markets.  To  a  certain  extent  the  seasonal  fluctu- 
ation in  price  will  also  vary  from  year  to  year  in  any 
one  of  these  markets.  For  instance,  the  spring 
starts  earlier  and  the  frosts  somewhat  later  in  the 
Philadelphia  district  than  in  the  New  York  district. 
The  clay  soil  of  northern  Ohio  is  preeminently  suited 
to  dairying,  while  other  farm  products  compete  with 
dairying  in  the  blue  grass  region  surrounding  Louis- 
ville. The  long  rainy  season  of  the  Seattle  region 
with  grass  practically  the  year  round  is  quite  in 
contrast  to  the  butter  producing  hill  regions  of  Ver- 
mont with  its  long  winters.  The  Elgin  dairy  region 
is  close  to  the  large  corn  and  wheat  market  in 
Chicago,  while  the  dairy  region  in  New  York  State 
is  far  from  a  surplus  corn  and  wheat  area.  As 
between  each  of  these  primary  market  areas  there 
must  be  a  variation  in  price  that  will  reflect  dif- 
ferentials in  producing  and  seasonal  conditions,  and 
transportation  costs. 

Inasmuch  as  all  these  leading  production  areas 
94 


PRICE  INTERDEPENDENCE  OF  MARKETS 

have  at  hand  a  considerable  industrial  population, 
the  price  for  milk  for  whole  milk  consumption  will 
also  vary  in  the  different  seasons,  depending  upon 
many  factors  peculiar  to  each  market.  One  factor 
is  the  price  that  has  to  be  paid  to  attract  milk  from 
butter  and  other  milk  factories  into  the  whole  milk 
market.  How  much  this  price  must  be  above  the 
butter  or  cheese  market  depends  upon  the  rapidity  of 
growth  of  city  populations  as  compared  with  the 
increase  or  decrease  in  the  local  output  of  milk. 
For  there  is  a  limit  to  the  distance  whole  milk  can 
regularly  be  transported  to  market,  although  this 
distance  has  been  rapidly  increasing  with  better 
refrigeration  and  transportation  facilities.  Then 
again,  the  weather  in  one  area  will  be  more  or  less 
conducive  to  milk  production  than  in  another  area. 
Or  in  the  same  market,  one  winter  may  be  forbidding, 
another  winter  inviting  to  milk  production;  one 
summer  too  dry  for  pasture,  another  too  wet  for 
corn. 

Therefore  the  price  for  whole  milk  within  each  of 
these  larger  primary  markets,  during  the  months 
when  most  of  the  milk  produced  must  go  into  whole 
milk  consumption,  must  and  will  vary  from  market 
to  market.  National  price  uniformity  during  these 
months  is,  therefore,  not  to  be  expected,  nor  desired, 
and  if  attempted  must  fail.  It  is  only  when  the 
price  in  one  market  is  so  low  or  so  high  as  compared 
with  the  near-by  primary  markets  as  to  tempt  milk 
distributors  to  put  in  permanent  investments  in 
receiving  stations  in  these  other  markets  or  to  plan 

95 


THE  PRICE  OF  MILK 

to  buy  permanently  from  those  other  markets,  that 
the  price  in  one  primary  market  begins  to  affect  the 
price  in  near-by  primary  markets. 

In  seasons  when  the  supply  of  milk  in  the  primary 
markets  does  not  exceed  the  demand  for  whole 
milk  consumption,  the  supply  devoted  to  the  manu- 
facture of  milk  products  will  flow  into  whole  milk 
markets,  if  the  price  offered  is  enough  above  the 
prevailing  value  of  milk  for  manufacturing  purposes 
to  warrant  the  operators  in  closing  their  manufactur- 
ing plants  temporarily.  A  premium  sufficient  for 
this  purpose  is  often  paid  in  whole  milk  markets. 
To  this  extent  the  value  of  milk  for  manufacturing 
purposes  sets  the  lower  limit  to  the  price  of  milk  for 
direct  consumption  in  any  whole  milk  market. 

But  in  the  months  of  greatest  production,  the 
price  over  a  season  will  tend  to  be  practically  uniform 
in  all  the  primary  markets  of  any  country.  The 
variations  in  price  between  primary  market  areas 
will  be  due  either  to  differences  in  transportation 
costs,  to  the  bargaining  power  of  dealers  or  buyers, 
or  to  temporary  producing  or  climatic  conditions  as 
indicated  above.  Seasonal  and  annual  variations 
prove  to  be  small,  and  about  equal  to  freight  on 
feeds  or  dairy  products,  however  great  the  monthly 
variations. 

The  following  table  gives  the  average  annual  price 
for  extra  creamery  butter  and  for  whole  milk  cheese 
in  Chicago  and  New  York  City  for  seven  years,  and 
the  difference  between  the  price  in  the  two  markets. 
This  differential  is  not  the  same  for  succeeding  years. 

96 


PRICE  INTERDEPENDENCE  OF  MARKETS 


The  differential  for  butter  averages  1.5  cents  per 
pound  for  the  seven  years,  and  0.9  cent  per  pound  on 
cheese,  or  around  15  cents  per  cwt.  on  whole  milk. 
The  differential  for  butter  was  twice  in  1918 
what  it  was  in  1917,  yet  less  for  cheese.  The  dif- 
ferential for  Chicago  is  greater  over  San  Francisco 
than  here  shown  for  New  York  over  Chicago. 
Philadelphia  prices  range  slightly  above  those  in 
New  York. 

AVERAGE  ANNUAL  WHOLESALE  PRICE  OP  BUTTER  AND  CHEESE, 

NEW  YORK  AND  CHICAGO,  AND  EXCESS  OP  NEW  YORK 

PRICE  OVER  CHICAGO  PRICE,  1913-1919 

BUTTER 


1913. 

1914. 

1915. 

1916. 

1917. 

1018. 

1919. 

New  York          

$0.323 

$0.299 

$0.2988 

$0.3409 

$0  4341 

$0  512 

$0  6010 

Chicago  

.310 

.2873 

.2836 

.3254 

.421 

.4885 

5851 

Difference  . 

.013 

.0117 

.0152 

0155 

013 

0235 

0159 

CHEESE 


New  York 

154 

1518 

1509 

1805 

2390 

2666 

3155 

Chicago  

.142 

.1438 

.1423 

.1744 

.2265 

2637 

3019 

Difference 

012 

0080 

0086 

0061 

0125 

0029 

0136 

For  the  thirty  months  from  January,  1918,  to 
June,  1920,  the  price  to  the  producers  in  the  New 
York  territory  averaged  33  cents  per  hundred  pounds 
above  the  price  received  by  producers  in  Chicago 
territory.  These  may  not  be  typical  months.  Thus 
the  New  York  price  was  below  the  price  in  Chicago 
for  August,  September,  October,  and  November, 

7  97 


THE  PRICE  OF  MILK 

1919,  because  of  the  formula  is  use  in  New  York 
territory  in  that  year  as  described  on  page  60. 
There  is  no  constant  ratio  as  between  any  of  the 
months  for  any  season,  however. 

This  point  is  enforced  by  an  examination  of  the 
location  of  cheese  and  butter  factories  in  the  United 
States.  Practically  all  the  cheese  factories  in  the 
United  States  "are  located  where  the  average  grow- 
ing season  is  less  than  155  days,  except  along  the 
immediate  shores  of  the  Great  Lakes  and  the  Pacific 
coast,  where,  although  the  growing  season  is  longer, 
the  temperature  is  cool/'  Cheese  factories  are 
located  where  the  weather  is  cool  enough  to  keep  a 
uniform  high  grade  of  milk  and  where  land  values 
are  low,  pastures  plentiful  and  the  costs  of  summer 
production  low.  Nine-tenths  of  all  the  creameries 
are  east  of  the  Missouri  and  north  of  the  Ohio  river,1 
one-half  in  Wisconsin,  one-fourth  in  New  York  State. 
The  creameries  are  chiefly  in  Wisconsin,  Minnesota, 
Iowa,  Michigan,  New  Hampshire,  Vermont,  New 
York,  and  Pennsylvania. 

The  price  for  cheese  and  butter,  as  of  other 
storage  products,  is  fixed  by  national  and  inter- 
national forces.  Butter  and  cheese  are  both  made  in 
or  near  to  the  very  regions  supplying  the  larger 
industrial  centers  with  whole  milk.  Only  to  a 
limited  extent  can  the  consumers  of  whole  milk 
underwrite  the  losses  of  milk  distributors  in  manu- 
facturing their  surplus  milk  into  storage  products. 
As  soon  as  this  difference  becomes  large,  price  factors 

»  See  maps  on  pages  118  and  119  of  "Geography  of  World's  Agriculture",  op.  cit. 

98 


PRICE  INTERDEPENDENCE  OF  MARKETS 

force  the  price  for  whole  milk  downward  to  approach, 
if  not  to  equal,  the  price  for  manufactured  milk. 
But  in  the  months  of  maximum  production  the  price 
in  any  one  of  the  primary  districts  must  be  about 
the  same  as  in  other  primary  districts,  for  price 
factors  now  determining  the  value  of  milk  are  the 
prices  received  or  anticipated  for  butter,  cheese, 
condensed  and  powdered  milk.  (See  chart  on  page 
79.) 

A  new  factor  that  will  stabilize  the  price  of  milk 
between  the  seasons  of  scarcity  and  the  seasons  of 
plenty  is  the  growing  use  of  dried  milk. 

The  use  of  milk  powders  will  have  a  stabilizing 
influence  on  the  whole-milk  market  far  beyond  the 
expectations  of  most  producers.  Skim  milk  powder 
with  sweet  butter  and  water  run  through  an  emul- 
sifying machine  makes  a  reconstituted  milk  that, 
according  to  the  best  advice  of  specialists,  may  be 
as  wholesome  as  natural  milk.  If  made  with  filtered 
water,  this  remade  milk  cannot  be  surely  told  from 
natural  milk.  It  may  not  taste  as  good  as  natural 
milk,  but  it  is  a  fair  substitute.  The  author  finds 
considerable  quantities  of  it  used  in  towns  large  and 
small  though  not  advertised  or  sold  as  such.  When 
sold  as  fresh  milk  it  is  usually  mixed  with  whole 
milk. 

The  economic  significance  of  this  remade  milk  has 
not  been  fully  appreciated.  Its  wide  use  will  mean 
that  condensed  skim  milk  from  the  Seattle  region 
can  be  mixed  with  butter  from  Wisconsin  and  filtered 
water  from  the  Hudson  and  sold  in  New  York  City 

99 


THE  PRICE  OF  MILK 

as  "Remade  Milk."  Whole  milk  powder  can  be 
used  likewise.  During  the  war  the  demand  for  milk 
powders  by  the  American  Red  Cross  and  allied 
organizations  has  been  so  heavy  that  their  use  for 
domestic  purposes  has  not  been  as  large  as  would 
have  been  possible  otherwise.  We  can  expect  a 
considerable  use  of  these  dried  milks  in  the  years  to 
come. 

There  are  three  varieties  of  dried  milk  powders: 
Full  cream,  half  cream  and  skim.  The  conclusion 
reached  by  British  health  authorities,  after  consider- 
ing a  wide  use  of  milk  powders  for  infants  when 
breast  feeding  was  impossible  was  that  dried  milk 
probably  was  no  better  than  and  perhaps  slightly 
inferior  to  fresh  cow's  milk.  Scurvy  and  rickets  are 
rare  in  infants  fed  on  this  preparation,  although  the 
occasional  use  of  fruit  juice  is  desirable.  In  at  least 
seventy-six  districts  in  the  United  Kingdom  milk 
powder  was  being  used  in  maternity  and  child  wel- 
fare stations.  The  growth  curves  of  children  fed 
exclusively  upon  dried  milk  from  birth  closely  re- 
semble the  average  growth  curve  of  breast-fed 
children,  although  at  somewhat  lower  levels  by  rea- 
son of  the  more  delicate  condition  of  these  children. 
The  health  authorities  in  Great  Britain  have  reached 
the  conclusion  "that  cow's  milk,  during  the  process 
of  desiccation,  loses  none  of  the  characters  which  are 
necessary  for  the  support  of  normal  growth  in  in- 
fants/' The  wholesomeness  of  dried  milk  as  com- 
pared with  fresh  milk  is  discussed  in  the  chapter  on 
the  Food  Value  of  Milk. 

100 


PRICE  INTERDEPENDENCE  .  OF  MARKETS 


The  use  of  powdered  milk  will  be  a  governor  that 
may  prevent  abnormally  high  prices  in  the  scarce 
months  to  farmers  in  whole  milk  regions,  but  it  gives 
to  farmers  in  other  territories  where  milk  may  be 
cheaper,  or  to  summer  producers,  a  relatively  wider 
market  for  their  milk.  The  first  effect  of  an  extended 
use  of  dried  milk  may,  therefore,  be  disadvantageous 
to  the  winter  milk  producers  in  or  near  large  cities. 
This  competition  has  its  limits,  however,  depending 
upon  the  price  of  milk  in  the  summer  and  the  price 
of  fresh  butter.  Moreover,  there  is  no  comparison 
between  the  taste  of  this  remade  milk  and  the  taste 
of  good  natural  milk,  and  the  better  tasting  natural 
milk  will  have  the  wider  sale  under  fair  chances. 

Skim  milk  powders  keep  indefinitely  while  whole 
milk  and  cream  powders  as  yet  do  not.  In  1917, 
22,624,357  pounds  of  powdered  skim  milk  were  pro- 
duced in  the  United  States  as  compared  with  25,- 
432,007  in  1918.  In  1918  we  produced  in  this 
country  4,164,334  pounds  of  powdered  whole  milk, 
as  compared  with  3,138,809  in  1917. 

While  the  processes  for  making  condensed  milk 
and  milk  powders  both  date  in  origin  from  the  years 
just  preceding  the  Civil  War,  the  manufacture  of 
dried  milk  has  expanded  notably  in  the  last  decade. 
Powdered  skim  milk  is  used  by  bakers  for  breads, 
biscuits,  cakes,  and  custard  in  preference  to  whole 
skim  milk  or  condensed  milk  because  it  is  easier  to 
handle  and  to  mix.  For  the  higher  grades  of  cakes 
and  biscuits  whole  milk  powders  are  used.  The 
ice  cream  manufacturer  uses  skim  milk  powder  for 

101 


THE  PRICE  OF  MILK 

giving  ''body"  and  smoothness  to  his  product,  and 
cream  powders  for  richness.  The  confectioner  uses 
whole  milk  and  cream  powders  for  his  caramels, 
milk  chocolates,  and  fudges.  Milk  and  cream  dis- 
tributors use  it  both  for  making  and  standardizing 
their  products.1 

The  price  factors  at  work  in  any  one  of  these 
primary  markets  will  keep  the  price  practically  uni- 
form for  the  same  grade  of  milk  as  between  all  the 
local  markets  within  this  primary  market. 

In  the  first  place,  there  are  towns  and  cities  of  no 
inconsiderable  size  and  number  within  each  of  these 
primary  markets.  An  increase  or  decrease  of  as 
much  as  one-half  cent  a  quart  is  sufficient  to  draw 
milk  into  one  town  or  city  out  of  an  area  that  has 
been  furnishing  another  town  or  city.  If  the  local 
supply  of  whole  milk  is  short,  dealers  buy  ice  cream 
or  cream  or  whole  milk  itself  from  other  places,  or 
they  may  make  whole  milk  or  cream  from  dried 
milk  powders.  If  any  variation  in  supply  or  price  in 

»  The  following  definitions  and  standards  for  powdered  milks  have  been  recently 
adopted  by  the  joint  Committee  on  Definitions  and  Standards  of  the  American 
Association  of  Dairy,  Food  and  Drug  Officials,  and  the  Association  of  Official 
Agricultural  Chemists: 

''Dried  milk  is  the  product  resulting  from  the  removal  of  water  from  milk,  and 
contains,  all  tolerances  being  allowed  for,  not  less  than  twenty-six  (26)  per  cent 
of  milk  fat,  and  not  more  than  five  (5)  per  cent  of  moisture. 

"Dried  skim-milk  is  the  product  resulting  from  the  removal  of  water  from  skim 
milk  and  contains,  all  tolerances  being  allowed  for,  not  more  than  five  (5)  per  cent 
of  moisture. 

"Malted  milk  is  the  product  made  by  combining  whole-milk  with  the  liquid 
separated  from  a  mash  of  ground  barley,  malt,  and  wheat  flour,  with  or  without 
the  addition  of  sodium  chloride,  sodium  bicarbonate,  and  potassium  bicarbonate 
in  such  a  manner  as  to  secure  the  full  enzymic  action  of  the  malt  extract  and  by 
removing  water.  The  resulting  product  contains  not  less  than  seven  and  one-half 
(7.50)  per  cent  of  butter  fat  and  not  more  than  three  and  one-half  (3.5)  per  cent 
of  moisture." 

102 


PRICE  INTERDEPENDENCE  OF  MARKETS 

any  local  market  seems  to  be  permanent,  investments 
in  country  receiving  stations  are  made  in  another 
producing  district  offering  cheaper  prices.  Within 
any  primary  market  district,  therefore,  milk  prices 
must  tend  to  be  uniform  as  between  localities.  The 
value  to  farmers  and  to  dealers  and  manufacturers 
of  price  uniformity  throughout  any  primary  district 
is  further  discussed  in  Chapter  VII. 

In  conclusion.  The  price  of  milk  in  local  towns 
and  cities  must  keep  fairly  equal  throughout  a  pri- 
mary market  area.  Prices  for  milk  as  between  pri- 
mary market  areas  will  vary  sufficiently  in  the  season 
of  scarce  production  to  meet  prevailing  producing 
conditions.  The  variation  has  its  limits  due  to  the 
price  of  cold  storage  products.  Variations  in  price 
in  the  season  of  maximum  production  as  between 
primary  markets  for  a  number  of  years  about  equals 
transportation  costs  and  rates  on  feeds  or  dairy 
products  or  both,  though  the  price  by  months  will 
vary  with  local  conditions.  In  turn  the  prices  in 
the  primary  market  areas  of  any  one  country  must 
keep  in  tune  with  national  and  world  prices  on  stor- 
age dairy  products. 

The  world  market  ever  hovers  over  the  price  pre- 
vailing in  the  national,  the  primary  and  the  local 
market.  Milk  and  its  products  are  stable  in  price 
because  the  storage  products  are  mobile  in  transport. 


103 


CHAPTER  V 

The  Cost  of  Production 

Among  all  the  forces  which  jointly  determine  the 
price  that  farmers  must  and  will  get  for  their  milk, 
the  cost  of  production  is  of  first  importance.  Second 
in  power  only  is  the  demand  of  the  consumer  de- 
pendent upon  whether  or  not  she  believes  the  milk 
(or  its  products)  is  worth  the  price  asked.  One  may 
convince  a  Fiji  Islander  that  it  costs  fifty  dollars  to 
make  a  dress  suit.  But  that  fact  alone  will  not 
convince  the  aforesaid  Islander  that  the  dress  suit 
is  worth  fifty  dollars  to  him.  If  he  does  not  buy, 
dress  suits  are  not  made.  So  the  consumer  will  not 
purchase  milk  unless  she  believes  it  is  a  good  buy 
in  comparison  with  what  she  thinks  is  the  value  of 
the  alternatives.  Nor  will  the  farmer  produce  milk 
if,  in  the  long  run,  he  can  get  better  living  standards 
by  engaging  in  other  alternatives  on  the  farm  or  in 
work  other  than  farming. 

As  to  these  elementary  facts  there  will  be  no  dis- 
agreement. The  problem  beset  with  difficulties  and 
differences  in  opinion  and  judgment  is  as  to  just 
what  is  the  cost  of  producing  milk  at  any  given  time. 

First  is  the  question  whether  the  joint  costs  of 
farm  operations  as  a  whole  shall  be  the  cost  unit  or 
whether  the  cost  unit  shall  be  the  cost  of  producing 
each  article  on  the  farm.  As  a  matter  of  fact,  both 
costs  must  be  found  before  there  is  a  final  judgment 

104 


i 


THE  COST  OF  PRODUCTION 

as  to  either.    Each  is  relatively  useless  without  the 
other. 

Two  methods  have  been  used  to  find  out  what  is 
the  cost  of  producing  milk.  One  is  the  "field,"  the 
other  the  "formula"  method. 


The  Field  Method 

The  "field"  method  is  to  ascertain  the  cost  of 
producing  milk  from  actual  cost  records  kept  by 
farmers  on  their  own  farms  or  by  agricultural  experi- 
ment stations.  A  considerable  number  of  such 
investigations  have  been  made  in  all  parts  of  the 
country.  As  chairman  of  the  Tri-State  Milk  Com- 
mission appointed  by  the  Governors  of  Pennsyl- 
vania, Maryland  and  Delaware,  the  author  was 
given  the  responsibility  for  conducting  such  an  in- 
vestigation in  the  states  named.  Thousands  of 
letters  were  sent  out  in  an  attempt  to  find  all  the 
cost  records  available  in  the  district.  Many  others 
have  used  the  same  method. 

This  method  has  many  merits.  In  the  first  place, 
the  farmers'  own  records  constitute  the  testimony. 
This  has  the  advantage  of  personal  direct  contact 
with  the  cost  data  of  those  who  will  be  directly 
affected  by  the  results.  It  has  the  merit  also  of 
limiting  evidence  to  concrete  facts  and  conditions. 
It  throws  out  the  biased  opinion  testimony  that  has 
been  used  in  some  quarters  under  the  formula 
method.  The  consumer  as  well  as  the  farmer  has 
confidence  in  the  method  because  it  is  personal  and 
factual. 

105 


THE  PRICE  OF  MILK 

The  difficulties  with  this  method  are  not,  as  has 
been  so  frequently  stated,  that  dairymen  do  not 
keep  records  sufficiently  accurate  and  detailed.  In 
these  days  of  cow  testing  associations  and  county 
farm  agents  the  percentage  of  farmers  who  are  keep- 
ing accurate  cost  records  on  dairy  farms  is  relatively 
as  large  as  is  the  percentage  of  factory  owners  or  of 
small  merchants  who  keep  cost  records  for  their 
respective  businesses.  The  number  of  such  records 
on  dairy  farms  is  now  sufficient  to  justify  conclusions. 

The  difficulty  with  the  method  is  to  select  from 
the  records  filed  those  that  are  typical  of  the  dairy- 
ing conditions  in  the  district.  If  a  dairy  is  kept  on 
land  of  high  value  for  suburban  dwellings  the 
amounts  charged  to  rent  or  to  return  on  land  owned 
should  be  stated  separately  so  that  that  portion  of 
land  values  due  to  holding  it  for  speculative  real 
estate  purposes  will  be  reflected  in  its  own  account 
and  not  in  the  dairy  account.  Fancy  stock  farms 
run  as  hobbies  by  city  gentlemen  must  show  by  the 
records  the  costs  due  to  high  tastes  and  rustic 
pleasure,  and  the  losses  due  to  poor  judgment  as 
well  as  the  bona  fide  costs  of  the  dairy.  Again,  milk 
costs  on  a  farm  not  suitable  for  dairying  may  have 
little  value  as  guidance  to  milk  costs  in  districts 
adapted  to  dairying.  The  records  themselves  must 
be  examined  in  all  cases  for  assurance  of  accuracy. 

The  cost  records  used  as  the  basis  for  judgment 
must  be  typical  costs  from  typical  dairies  in  the 
typical  dairy  district  in  the  region,  if  the  purpose  is 
to  find  out  the  cost  of  producing  milk  for  a  city  in 

106 


THE   COST  OF  PRODUCTION 

the  dairy  districts  supplying  the  city,  as  distinct 
from  the  cost  of  producing  milk  on  a  given  farm  for 
the  guidance  of  the  owner  or  operator  of  the  farm. 

In  the  Cleveland  district  the  average  number  of 
cows  on  the  dairy  farm  is  about  eight.  The  size  is 
kept  down  to  the  number  that  will  consume  all  the 
roughage  grown  on  the  farm.  In  other  districts, 
such  as  Baltimore  and  "Washington,  D.  C.,  the 
herds  are  larger.  Again  the  length  of  the  pasturing 
season  and  the  value  of  the  pasture  will  vary  from 
section  to  section.  The  value  of  land  per  acre  will 
reflect  the  most  profitable  uses  to  which  the  farms 
in  a  given  neighborhood  are  or  can  be  put.  These 
uses  may  not  include  dairying.  In  public  testimony 
particularly  one  may  hear  most  from  those  hurt 
worst.  And  these  may  be  affected  by  factors  other 
than  dairy  costs  under  good  practice  in  a  region 
suitable  to  dairying.  Moreover,  the  findings  as  to 
production  costs  by  this  method  are  accurate  only 
so  long  as  feed  and  labor  costs  do  not  change 
materially. 

It  is  only  when  applied  with  such  facts  as  these 
in  mind  that  the  "field"  method  is  accurate.  But 
applied  with  such  facts  in  mind  the  method  gains  the 
confidence  of  farmers  and  consumers;  it  gets  at  the 
real  facts;  it  discovers  not  only  the  many  economic 
factors  at  work  in  a  given  territory  to  increase  or 
decrease  dairying  herds,  but  it  also  compares  the 
profitableness  of  dairying  with  other  uses  of  the  farm. 
To  be  worth  while,  the  reports  used  for  such  purposes 
should  be  of  continuous  and  permanent  record. 

107 


THE  PRICE  OF  MILK 

The  Formula  Method 

The  formula  method  is  the  outgrowth  of  the  facts 
ascertained  in  these  "laboratory"  investigations. 
The  dairy  cow  is  to  a  considerable  extent  a  standard- 
ized factory.  She  is  not  exactly  standardized  or 
breeders'  and  cow  testing  associations  would  have 
little  need  for  existence.  But  to  the  extent  that  the 
dairy  cow  is  a  standard  factory,  one  can  estimate 
the  costs  of  her  factory  product  (milk)  by  multiply- 
ing the  units  of  raw  materials  (feed)  and  labor  em- 
ployed in  producing  that  product  by  the  prevailing 
price  of  the  raw  materials  and  the  prevailing  wages 
for  labor.  The  great  value  of  the  method  lies  in 
the  fact  that  it  can  be  used  in  periods  of  rapidly 
changing  feed  prices  and  labor  wages. 

The  splendid  field  work  of  such  dairy  experts  as 
Professor  Fred  Rasmussen  of  Pennsylvania  State 
College  had  to  precede  the  working  out  of  the  formula 
method.  Then  came  the  work  of  Professor  Larson 
on  "Milk  Production  Cost  Accounts."1  Other 
professors  in  agricultural  colleges  undertook  to  find 
out  the  constant  units  to  which  the  prices  for  these 
units  prevailing  at  a  given  time  could  be  applied  to 
ascertain  the  cost  of  producing  milk  under  any  given 
schedule  of  feed  costs  and  wages.  Among  such  men 
should  be  mentioned  Professor  F.  A.  Pearson  of  the 
University  of  Illinois,  Professor  Anderson  of  Michi- 
gan Agricultural  College,  Professor  H.  C.  Taylor  of 
Wisconsin  and  Professor  G.  F.  Warren  of  Cornell. 

i  Larson,  C.  W.f  "Principles  and  Methods  of  Milk  Production  Costs  and  Ac- 
counts," New  York,  Columbia  University  Press,  1010. 

108 


THE   COST   OF  PRODUCTION 

Just  about  the  time  certain  of  these  experts  were 
maturing  their  studies  a  committee1  was  appointed, 
of  which  the  author  was  elected  chairman,  to  report 
to  Mr.  Herbert  C.  Hoover  as  Federal  Food  Admin- 
istrator on  "The  Production,  Distribution  and  Food 
Value  of  Milk/'  Professors  Pearson  and  Warren 
were  on  this  committee.  To  them  as  a  sub-com- 
mittee was  assigned  the  task  of  reporting  to  the 
whole  committee  on  production  costs.  Material 
long  in  being  collected  by  these  two  professors  and 
costs  records  secured  by  correspondence  from  many 
other  sources  were  used  in  making  their  report. 
From  the  records  of  many  thousands  of  cows,  they 
selected  records  for  976  cows  on  490  farms  producing 
milk  for  city  markets  in  six  northern  states.  The 
states  were:  Minnesota,  Michigan,  Massachusetts, 
Connecticut,  New  York  and  New  Jersey.  On  the 
average  49.3  per  cent  of  the  milk  of  these  herds  was 
produced  in  the  six  months  beginning  in  October. 
From  their  examination  of  these  costs  and  quantity 
records,  the  sub-committee  found  that  in  these  herds 
the  average  quantities  of  feed  and  labor  used  to 
produce  100  pounds  of  milk  were: 

2.88  hours  of  labor. 
33.5  pounds  of  grain  (concentrates). 
45.3  pounds  of  hay. 
11.5  pounds  of  other  dry  forage. 
93.2  pounds  of  silage. 

9.4  pounds  of  other  succulent  feed. 

1  The  members  of  this  committee  were:  Clyde  L.  King,  Chairman;  Mrs.  A.  W. 
Smith,  F.  A.  Pearson,  J.  W.  Sullivan,  Gifford  Pinchot,  G.  F.  Warren. 

109 


THE  PRICE  OF  MILK 


The  committee  report  from  this  point  based  upon 
the  reports  of  this  sub-committee  follows: 

The  above  items  made  80.8  per  cent  of  the  total 
yearly  average  net  cost  of  milk  after  the  value  of 
the  calf  and  manure  and  miscellaneous  returns 
were  deducted  from  the  cost.  The  amount  of 
feed  consumed  is  much  more  than  the  average  in 
winter  and  less  in  summer.  Approximate  average 
yearly  costs  of  production  with  given  prices  of  feed 
and  labor  can  be  estimated  for  the  above  averages. 
But  the  costs  in  summer  are  much  below  the  aver- 
age, and  in  winter  are  more  than  the  average. 

Some  estimate  of  prices  to  be  expected  can  be 
made  by  comparing  past  prices  for  different 
months.  The  comparative  prices  paid  to  pro- 
ducers for  milk  in  different  months  when  the 
average  for  the  year  is  100  per  cent  have  been  as 
follows: 

PERCENTAGE  OP  YEARLY  AVERAGE  PRICES  PAID  TO  FARMERS 

FOR  MILK  FOR  TEN. YEARS  ENDING  OCTOBER  1,  1916. 

NEW  YORK  AND  CHICAGO. 


Chicago 

New  York 

Chicago 

New  York 

Month. 

Milk 

"26-cent  zone" 

Month. 

Milk 

"26-cent  zone" 

News. 

Milk  Reporter. 

News. 

Milk  Reporter. 

January 

117.2 

119  0 

July..      . 

84  8 

81  0 

February  

112.6 

114.7 

August  

95.4 

90.8 

March  

104.6 

106.1 

September  

98.0 

96.9 

April  

95.4 

93.9 

October  

107.2 

110.4 

May  

79.4 

79.1 

November  .  . 

115.8 

119.0 

June 

71  5 

70  6 

December  . 

118  5 

120.2 

An  approximate  estimate  of  prices  that  might 

be  expected  can  be  made  by  using  the  quantities 

of  feed  and  labor  required  and  the  past  yearly 

distribution  of  price    as    shown  in    the    above 

110 


THE  COST  OF  PRODUCTION 

table.  For  instance,  if  labor  is  25  cents  an  hour, 
grain  $55  a  ton,  hay  $15,  other  dry  forage  $7, 
silage  and  other  succulent  feeds  $6,  the  average 
yearly  net  cost  of  100  pounds  of  3.7  milk  for  herds 
as  good  as  those  reported  would  be  $2.88.  If  the 
average  price  were  $2.88,  and  if  the  prices  in  dif- 
ferent months  followed  the  average  course,  the 
New  York  November  price  to  the  farmer  might 
beexpected  to  be  approximately  $3.43  (7.37  cents  a 
quart),  and  the  June  price  $2.03  (4.36  cents  a 
quart). 

If  labor  is  20  cents,  grain  $45,  hay  $10,  other 
dry  forage  $5,  silage  and  other  succulent  feeds  $4, 
the  average  yearly  cost  would  be  $2.22.  If  the 
average  price  were  $2.22  and  if  the  prices  in  dif- 
ferent months  followed  the  usual  course,  a  Novem- 
ber price  of  approximately  $2.64  might  be  expected, 
and  a  June  price  of  $1.57. 

If  labor  is  worth  30  cents,  grain  $65  a  ton,  hay 
$20,  other  dry  forage  $10,  silage  and  other  succulent 
feed  $8,  the  yearly  average  cost  would  be  $3.56. 
If  the  average  price  were  $3.56,  and  if  the  distribu- 
tion by  months  followed  the  average  course,  a 
November  price  of  approximately  $4.24  (9.12 
cents  a  quart)  and  a  June  price  of  $2.51  (5.4  cents 
a  quart)  might  be  expected. 

On  the  basis  given  above  the  farmer  would  re- 
ceive more  than  the  assumed  wage  in  summer  and 
less  in  winter  because  the  difference  in  cost  between 
summer  and  winter,  if  wages  are  uniform,  is  more 
than  the  difference  in  price. 

With  the  publication  of  these  results  the  formula 
method  was  used  more  or  less  by  each  of  the  various 
Milk  Commissions  appointed  by  the  Food  Admin- 
istration in  the  different  primary  markets  of  the 

ill 


THE  PRICE  OF  MILK 

country.  It  was  used  notably  by  the  Chicago  Milk 
Commissions.  In  the  summer  and  autumn  of  1918 
Judge  W.  E.  Lamb,  representing  the  United  States 
Food  Administration,  and  the  farmers  and  dis- 
tributors in  the  Chicago  market  used  the  formula 
method  to  arrive  at  a  price  to  producers.  The 
formula  thus  used  in  the  Chicago  district  was  known 
as  the  Modified  Pearson  Formulabecause  of  Professor 
Pearson's  pioneer  work  in  developing  the  formula, 
and  his  rational  and  fair  application  of  it,  and  because 
of  his  modification  of  his  formula  obtained  from 
actual  feed  records  to  one  easier  of  practical  use  in 
price  fixing. 

Professor  Pearson's  researches  had  led  him  to 
believe  that  in  the  Chicago  district  44  pounds  of 
grain,  118  pounds  of  silage,  50  pounds  of  hay,  39 
pounds  of  dry  forage  and  2.42  hours  of  labor  pro- 
duced 100  pounds  of  average  milk.  After  a  thorough 
investigation  he  found  that  the  following  "modified" 
formula  would  yield  substantially  similar  results  and 
give  a  definite  market  basis  for  feed  prices:  20 
pounds  of  home  grown  grains  based  on  the  value  of 
corn,  24  pounds  of  manufactured  feeds,  110  pounds 
of  hay  and  3  hours  of  labor. 

The  following  memorandum,  adopted  on  July  1, 
1918,  under  the  mediation  of  Judge  W.  E.  Lamb 
for  the  United  States  Food  Administration,  will 
indicate  the  methods  agreed  on  by  these  parties  for 
determining  price  units  and  for  making  monthly 
distribution  of  the  average  yearly  price  thus  arrived 
at: 

112 


THE   COST  OF  PRODUCTION 

The  price  to  be  paid  by  purchasers  of  milk  to  the 
producers  in  the  so-called  Chicago  district  for  the 
month  of  July  is  $2.30  per  100  pounds  for  3.5  per 
cent  milk;  four  cents  to  be  added  for  butter  fat, 
for  each  point  above  that  amount  and  same 
amount  to  be  deducted  for  each  point  below  3.5 
per  cent.  The  retail  price  for  delivered  bottled 
milk  in  Chicago  for  the  month  of  July,  1918,  is 
to  remain  at  12  cents  per  quart. 

The  prices  for  milk  to  be  paid  to  the  producers 
in  the  Chicago  district  for  the  months  of  August, 
September,  October,  November  and  December, 
1918,  are  to  be  determined  in  the  following  manner: 

On  or  about  the  15th  day  of  the  month  preceding 
each  of  the  above  named  months  the  represen- 
tatives of  producers,  distributors,  ice  cream  manu- 
facturers and  condensers  of  milk  in  the  Chicago 
district  are  to  meet  the  representative  of  the 
Food  Administration  and  in  arriving  at  the  prices 
to  be  paid  producers  for  milk  for  the  month  under 
consideration,  the  following  feed  and  labor  formula, 
to- wit: 

20  pounds  of  home  grown  grains, 
24  pounds  of  manufactured  feeds, 
110  pounds  of  hay, 
3  hours  of  labor, 

shall  be  taken  as  correctly  representing  the  average 
amount  of  feed  and  labor  required  to  produce  100 
pounds  of  milk  in  said  district  during  said  period, 
the  same  being  the  feed  and  labor  formula  deter- 
mined by  the  Chicago  Milk  Commission. 

The  values  of  the  respective  amounts  of  grain, 
feeds,  hay  and  labor  aforesaid  in  any  given  month 
are  to  be  arrived  at  as  follows: 

First. — The  value  of  the  20  pounds  of  grain  and 
the  110  pounds  of  hay  determined  by  using  the 
s  113 


THE  PRICE  OF  MILK 

farm  values  of  corn  and  hay  in  the  states  of 
Illinois  and  Wisconsin  reported  by  the  Agricul- 
tural Department  on  the  first  day  of  the  preceding 
month,  the  figures  usually  being  available  by  the 
tenth  of  the  month. 

Second. — The  value  of  24  pounds  of  feed  to  be 
determined  as  follows: 

The  per  ton  values  of  the  following  feeds,  f.o.b. 
Milwaukee  or  Chicago,  are  to  be  taken  from  the 
daily  Feed  Report  published  at  Milwaukee,  to  wit: 

Ajax,  Unicorn  and  Arcady  mixed  feeds;  all 
kinds  and  grades  of  molasses  feeds;  cottonseed 
meal;  oil  cake  meal;  gluten  feeds;  hominy  feeds; 
brewers'  grains;  bran,  middlings  and  Schumacher 
feeds.  The  f.o.b.  per  ton  prices  as  quoted  in  said 
daily  paper  to  be  added  together  and  the  average 
per  ton  found.  To  that  average  price  per  ton 
shall  be  added  the  average  freight  rate  applying 
from  Milwaukee  or  Chicago  to  points  within  the 
Chicago  district,  which  is  today  approximately 
7J  cents  per  100  pounds.  In  addition,  there  shall 
be  added  to  the  average  per  ton  price  so  reached 
the  profit  per  ton  allowed  by  the  Food  Adminis- 
tration to  the  retail  dealer  in  such  feeds,  and  then 
there  shall  be  added  the  further  sum  of  $1.50  per 
ton  as  the  cost  of  hauling  the  same  from  the  feed 
dealer's  place  of  business  to  the  farm  of  the  con- 
sumer. 

Third. — The  value  of  three  hours  of  labor  to  be 
determined  by  the  average  going  prices  for  farm 
labor  paid  within  the  Chicago  district. 

When  the  values  of  the  various  items  have  been 
determined  as  aforesaid  and  added  together  the 
percentage  table  set  forth  below  and  known  as 
the  Pearson  Percentage  Scale  shall  then  be  used 
to  finally  determine  the  price  for  milk  for  the 
month  under  consideration,  to  wit: 

114 


THE  COST  OF  PRODUCTION 

Per  Cent.  Per  Cent. 

January 117  July 85 

February 112  August 95 

March 105  September 100 

April 95  October 107 

May 80  November 115 

June 70  December 119 

This  table  is  based  upon  the  average  monthly 
prices  paid  for  milk  for  a  ten-year  period  from 
which  Professor  Pearson  found  that  taking  the 
month  of  September  as  representing  the  average 
monthly  price  of  100  per  cent,  the  price  paid  in 
January  was  117  per  cent  of  the  average;  Feb- 
ruary, 112  per  cent;  March,  105  per  cent;  April, 
95  per  cent;  May,  80  per  cent;  June,  70  per  cent; 
July,  85  per  cent;  August,  95  per  cent;  October, 
107  per  cent;  November,  115  per  cent;  and 
December,  119  per  cent  of  the  average  monthly 
price,  and  it  being  believed  that  these  percentages 
fairly  reflect  the  same  relative  differences  in  cost 
of  production  either  above  or  below  the  average, 
the  percentage  of  the  values  of  the  various  items 
in  the  feed  and  labor  formula  as  aforesaid  shall  be 
taken  as  represented  by  the  percentage  figure 
opposite  such  month  under  consideration;  that 
is  to  say  when  the  values  of  the  various  items  of 
feeds,  hay  and  labor  have  been  determined,  as 
hereinbefore  provided,  for  the  month  of  August 
and  the  sums  thereof  added  together,  95  per  cent 
of  such  sum  shall  constitute  the  price  for  the 
month  of  August  and  the  percentage  applicable  to 
each  subsequent  month  applied  in  a  like  manner 
to  the  values  of  the  items  in  the  feed  and  labor 
formula  determined  in  the  same  way  for  such  sub- 
sequent month. 

If  increases  result  in  the  prices  to  be  paid  for 
fluid  milk  under  the  foregoing  plan  in  such  an 
115 


THE  PRICE  OF  MILK 

amount  that  the  distributors  of  fluid  milk  in 
Chicago  cannot  afford  to  deliver  the  same  at  12 
cents  per  quart,  such  increase  in  the  retail  price 
shall  be  permitted  as  will  enable  the  distributors 
to  overcome  such  increases  in  price  and  cost. 

The  Food  Administration  will  procure  each 
month  as  soon  as  they  may  be  available  the  farm 
values  of  corn  and  hay  in  the  States  of  Illinois  and 
Wisconsin  reported  by  the  Agricultural  Depart- 
ment as  of  the  first  of  each  month  and  communicate 
such  figures  to  the  representatives  of  the  parties 
in  interest.  The  wholesale  prices  of  feed  are  to 
be  taken  from  the  Daily  Feed  Report  and  averaged 
for  the  month  preceding  the  month  in  which  the 
conference  is  held. 

The  foregoing  correctly  sets  forth  the  under- 
standing of  the  representatives  of  the  parties  in 
conference  with  the  undersigned  on  the  28th  and 
29th  days  of  June,  1918,  at  the  office  of  the 
Food  Administration,  Conway  Building,  Chicago, 
Illinois. 

Dated,  July  1, 1918. 

The  application  of  this  formula  is  illustrated  from 
the  following  excerpts  from  the  memorandum  issued 
by  the  same  group  and  signed  by  Judge  Lamb  for 
determining  the  price  for  August,  1918: 

It  was  agreed  at  the  conferences  on  June  28th 
and  29th  that  the  farm  values  of  corn  and  hay 
should  be  those  reported  on  the  first  day  of  the1, 
month  preceding  the  month  in  which  the  price  of 
milk  was  under  consideration.  The  Agricultural 
Department  reports  the  farm  value  of  corn  and 
hay  in  Illinois  and  Wisconsin  as  of  July  1, 1918,  as 
follows: 

116 


THE   COST  OF  PRODUCTION 

Corn:    Illinois $1 .32  per  bushel 

Wisconsin 1.53    "         " 

or  an  average  of  $1 . 43    "         " 

Hay:     Illinois $15 . 80  per  ton 

Wisconsin.  .  .   15.90    "     " 


or  an  average  of  $15.85    "     " 

The  prices  of  feeds  in  the  district  were  deter- 
mined as  follows: 

The  average  monthly  prices  for  June  of  the 
following  feeds,  f.o.b.  Milwaukee: 

Ajax,  Unicorn,  R.K.D.  mixed  feeds;  Sucrene 
and  International  Milling  Company's  molasses 
feed;  cotton  seed  meal;  oil  cake  meal;  gluten 
feeds;  hominy  feeds;  brewer's  grains;  bran; 
middlings  and  Schumacher  feeds.  As  the  prices 
of  corn  and  hay  reported  by  the  Agricultural  De- 
partment as  of  July  1st  represented  the  average 
farm  prices  of  hay  and  corn  for  the  previous 
month  the  prices  of  the  foregoing  feeds  were  taken 
for  the  same  period  and  the  average  of  all  was 
found  to  be  $47.24  per  ton,  to  which  was  added 
the  average  freight  rate  of  7 J  cents  per  100  pounds 
or  $1.50  per  ton;  $2.00  per  ton,  the  profit  allowed 
by  the  Food  Administration  to  the  retail  dealer 
of  feeds  handling  the  same  in  ton  lots  or  less  and 
$1.50  per  ton  haulage  charge  from  the  feed  dealer's 
place  of  business  to  the  farm  of  the  consumer, 
which  made  the  average  price  of  all  classes  of 
feeds  for  the  period  mentioned  $52.24. 

The  average  price  of  farm  labor  in  the  district 
after  careful  investigation  was  found  to  be  30 
cents  per  hour. 

The  average  price  of  corn  at  $1.43  per  bushel 
for  the  period  mentioned  equals  $2.55  per  100 
pounds,  or  2.55  cents  per  pound.  The  average 
117 


THE  PRICE  OF  MILK 

price  of  feeds  of  $52.24  per  ton  equals  $2.612  per 
100  pounds,  or  2.6  cents  per  pound. 

The  average  price  of  hay  of  $15.85  per  ton  equals 
7.9  mills  per  pound. 

Using  these  factors,  we  find  20  pounds  of  com 
is  of  the  value  of  51  cents;  24  pounds  of  feed  is 
of  the  value  of  62  cents;  110  pounds  of  hay  is  of 
the  value  of  87  cents;  3  hours  of  labor  at  30  cents 
per  hour,  90  cents,  making  a  total  of  $2.90. 

After  determining  the  prices  of  the  items  as 
aforesaid  to  determine  the  final  price  that  shall 
be  paid  for  the  milk  it  was  also  agreed  that 
Professor  Pearson's  percentage  table  should  be 
used.  That  table  treats  September  as  the  100  per 
cent  month,  or  the  average  of  the  twelve  in  the 
matter  of  price.  April,  May,  June,  July  and 
August  are  below  the  average;  October,  November, 
December,  January,  February  and  March  are 
above  the  average.  It  was  determined  that  the 
price  for  August  should  be  95  per  cent  of  the 
average  based  on  the  foregoing  formula;  95  per 
cent  of  $2.90  equals  $2.75,  or  the  price  per  100 
pounds  that  the  producers  are  to  receive  for  the 
month  of  August.  This  is  for  3J  per  cent  milk, 
with  a  differential  of  4  cents  for  each  one-tenth  of 
1  per  cent  of  butter  fat  above,  or  a  reduction  in 
the  same  amount  for  each  one-tenth  of  1  per  cent 
of  butter  fat  below  3|  per  cent. 

If  the  feed  and  labor  formula  adopted  is  correct 
and  it  was  the  one  the  Chicago  Milk  Commission 
determined  to  be  correct,  after  careful  deliberation 
and  consideration,  there  can  be  no  question  as  to 
the  correctness  of  the  price  of  milk  for  August 
determined  in  the  manner  indicated.  When  it 
is  taken  into  account  that  the  number  of  pounds 
of  milk  produced  by  the  average  cow  per  year  is 
about  5000  pounds,  it  means  a  daily  average  of 
118 


THE  COST  OF  PRODUCTION 

about  13J  pounds.  This  would  require  something 
over  seven  days  to  produce  100  pounds.  It  is 
believed  that  the  amounts  of  feeds  stated  are  not 
more  than  necessary  to  produce  100  pounds  of 
milk  on  the  average. 

For  six  months  the  Chicago  group  used  the  Modi- 
fied Pearson  Formula  with  evident  satisfaction  to 
all,  as  all  parties  joined  in  an  effort  to  get  reasonable 
results  with  rational  methods.  It  was  abandoned, 
however,  immediately  upon  the  withdrawal  of  the 
Food  Administration,  and  methods  were  adopted 
that  secured  a  lower  price  level  (see  page  125). 

With  this  success  in  mind,  Judge  Lamb  in  the 
early  autumn  of  1918  suggested  that  the  purchasers 
of  milk  and  the  organization  of  dairymen  in  the 
New  York  district  likewise  agree  on  a  method  and  a 
formula,  and  price  units. 

The  formula  to  which  the  New  York  buyers  and 
sellers  turned  attention  was  the  Warren  formula, 
based  on  the  testimony  of  Professor  Warren  to  the 
effect  that,  to  produce  milk  of  the  average  butter  fat 
(3.8  per  cent)  in  the  New  York  district,  the  following 
feed  and  labor  units  were  required: 

Grain 33 . 79  pounds 

Hay 43.3 

Other  dry  forage 10.8 

Ensilage 92.2         " 

Other  succulent  food 8.3        " 

Human  labor 3 . 02  hours 

When  proper  current  prices  were  applied  to  these 
items,  the  result  according  to  Professor  Warren,  was 
79.9  per  cent  of  the  cost  of  producing  100  pounds  of 

119 


THE  PRICE  OF  MILK 

3.8  per  cent  milk,  the  remaining  20.3  per  cent  to 
represent  all  overhead  expenses  such  as  (1)  interest 
on  that  portion  of  equipment  devoted  to  the  dairy, 
(2)  the  full  depreciation  on  cows  so  that  herds  would 
be  fully  maintained,  (3)  bull  expense,  and  (4)  all 
minor  items  such  as  fly  killer,  etc.  The  100  per 
cent  price  for  producing  100  pounds  on  the  average 
yearly  cost  was  to  be  distributed  by  months  as 
follows: 

Per  Cent.  Per  Cent. 

January 119  July 81 .0 

February 114.7  August 90.8 

March 106. 1  September 96.9 

April 93.9  October 110.4 

May 79. 1  November 119.0 

June 70.6  December 120.2 

This  method  was  abandoned  after  a  short  trial, 
upon  the  withdrawal  of  the  Food  Administration, 
and  prices  since  have  not  been  equal  to  those  brought 
about  by  the  formula. 

To  get  results  with  the  formula  method  the  sources 
for  price  units  must  be  agreed  on  and  methods  must 
be  such  as  to  lead  to  accuracy,  and  rational  results. 
For  instance,  in  the  Chicago  district  farmers  and 
distributors  each  conducted  their  own  survey  as  to 
what  were  the  actual  going  wages  on  the  dairy 
farms,  each  with  the  desire  to  obtain  only  the  actual 
facts.  The  results  as  found  by  the  dealers  and 
farmers  respectively  were  not  over  one  cent  an  hour 
apart  and  the  figure  first  agreed  on  (30  cents  an  hour) 
was  a  fraction  of  a  cent  above  the  average  hourly 
wage  found  by  the  producers. 

120 


THE  COST  OF  PRODUCTION 


Many  difficulties  have  arisen  in  applying  the  for- 
mula method  when  one  party  to  collective  bargaining 
wanted  results  all  in  its  own  favor  and  was  ready  to 
use  inaccurate  methods  to  get  them. 

The  following  table  from  Hoard's  "Dairyman" 
of  November,  1918,  summarizes  the  various  formulas 
and  their  results  in  price. 

COMPARISON  OF  SEVERAL  SURVEYS  SHOWING  THE  ITEMS  ENTERING 
INTO  THE  COST  OP  PRODUCING  100  POUNDS  OF  MlLK 


Factors  in  Formula. 

Pearson. 

Modified 
Pearson. 

Warren. 

Hoover. 

Indiana. 

Michigan. 

Grain  (pounds) 

44  00 

44  00 

33  80 

33  50 

28  9 

23  50 

Hay  (pounds)  

50  00 

110  00 

43.30 

45.30 

38.1 

34.90 

Silage  (pounds) 

118  00 

100  50 

102  60 

104  8 

110  40 

Roughage  (pounds)  

39  00 

10  80 

11.50 

9  9 

15  20 

Labor  (hours)  

2.  $2 

3.00 

3.02 

2.88 

2.4 

2.11 

Corrective  factor  (per  cent)  — 

0 

0 

25 

23.7 

45.8 

COST  OF  PRODUCING  100  POUNDS  OF  MILK  ACCORDING  TO  CERTAIN 
FIXED  PRICES  AS  APPLIED  TO  DIFFERENT  FORMULAE 

(Feed  and  Labor  Costs  those  of  Autumn  of  1918) 


Factors  in  Formula. 

Pearson 

Modified 
Pearson. 

Warren. 

Hoover. 

Indiana. 

Michigan. 

Grain    

$1  10 

$1.100 

$0  845 

$0  838 

$0.723 

$0.588 

Hay  

.500 

1.100 

.433 

.453 

.381 

.349 

Silage           

564 

301 

.308 

.314 

.331 

.078 

.023 

.023 

.020 

.031 

Labor  

.605 

.750 

.755 

.720 

.600 

.623 

Total  feed  and  labor  
Correction 

$2.847 
0 

$2.950 
0 

$2.357 
589 

$2.342 
555 

$2.038 
? 

$1.822 
.834 

Total  cost  

$2.847 

$2.950 

$2.946 

$2.887 

? 

$2.656 

121 


THE  PRICE  OF  MILK 


The  "Hoover"  report  is  the  committee  report 
described  above.  The  "  Michigan "  report  refers  to 
the  formula  by  Professor  Anderson.  The  "  corrective 
factor"  has  been  noted  above  in  discussing  the  War- 
ren formula  as  the  amount  allowed  for  overhead 
expenses. 

The  following  table  compares  the  results  of  cer- 
tain special  studies  made  as  to  the  proportion  in 
the  cost  and  returns  of  milk  due  to  such  items  as 
feed,  labor,  taxes,  equipment,  bedding,  etc.  These 
studies  were  all  made  before  the  war: 

PERCENTAGE  COST  OP  FACTORS  IN  PRODUCTION  OP  MILK 


Massa- 
chusetts. 

Con- 
necticut. 

New 
Jersey. 

New 
Hamp- 
shire. 

Larson, 
Columbia 
University. 

Delaware 
County, 
New  York. 

Feed  

54.3 

57.6 

63.3 

49.4 

52.7 

67.8 

Labor 

21  5 

21  8 

22.4 

21.8 

18.9 

18  6 

Taxes,  cattle  

10.1 

11.3 

7.8 

9.0 

6.5 

2.0 

Miscellaneous         .     ... 

5  5 

1.3 

3.0 

4.5 

0  9 

Buildings  

4.6 

2.5 

2.6 

6.1 

5.7 

4.4 

Keep  of  bull  .        

2.4 

1  9 

1.0 

2.5 

2.5 

Equipment 

0  7 

0  3 

0  4 

Bedding  

3.2 

2.7 

2.7 

2.3 

0.8 

Hauling  milk 

4.8 

6.9 

5  0 

PERCENTAGE  RETURN  OF  FACTORS  IN  PRODUCTION 


Massa- 
chusetts. 

Con- 
necticut. 

New 
Jersey. 

New 
Hamp- 
shire. 

Larson, 
Columbia 
University. 

Delaware 
County, 
New  York 

Manure 

9  2 

6  5 

10  4 

10  1 

13.2 

7  6 

Calf  

1.2 

3  2 

3  1 

2.0 

1.9 

2.7 

Balance  for  milk  

89  6 

90  3 

86  5 

87  9 

84.9 

89.8 

122 


THE  COST  OF  PRODUCTION 

The  formula  method,  when  fairly  used,  is  a  valu- 
able guide  to  production  costs.  It  does  not  give 
"the  cost  of  production"  within  any  exact  sense  of 
those  words.  The  per  cent  of  error  in  the  assumption 
that  the  cow  is  a  standard  factory  is  one  that  few 
would  attempt  to  state  numerically.  The  costs  for 
the  same  cow  in  a  hard  winter  like  1917-18  are 
larger  than  in  a  mild  winter  like  1918-19.  More- 
over, the  percentages  assumed  for  the  monthly  dis- 
tribution were  based  on  the  average  of  market  prices 
for  ten  years  and  are  not  based  on  any  monthly 
variation  in  production  costs.  For  instance,  are 
March  costs  actually  14  per  cent  lower  than  No- 
vember costs?  Milk  is  produced  more  freely  in 
March  than  in  November,  and  the  prices  of  dairy 
products  in  storage  break  because  the  season  of 
plentiful  supply  is  at  hand.  How  much  of  this 
average  ten  year  variation  was  due  to  this  market 
fact  of  greater  supply  and  how  much  to  the  cost 
fact  that  the  cows  naturally  produce  more  with  less 
attention  in  March  than  in  November?  In  both 
the  Chicago  and  New  York  markets  during  the  ten 
years  when  the  market  averages  were  taken,  more 
and  more  milk  had  to  be  taken  for  whole  milk  con- 
sumption in  the  autumn  months  because  of  growing 
city  populations.  Was  this  fact  properly  reflected 
in  the  price  paid  for  milk?  Is  this  proportional 
increase  in  the  need  for  milk  for  city  comsumption 
the  same  now  as  in  those  ten  years?  Again,  just 
what  is  the  value  of  a  day's  work  on  a  farm  in  winter 
as  compared  with  a  day's  work  at  seeding  or  harvest 

123 


THE  PRICE  OF  MILK 

time?  Assume  that  the  price  of  milk  is  based  on  the 
average  going  wage  actually  being  paid.  Is  there 
any  seasoned  old  farmer  who  will  not,  in  his  own 
mind,  make  his  own  estimate  on  these  matters  and 
plan  his  farm  output  accordingly?  Is  the  labor  of 
women  and  children  during  seasons  when  it  has  no 
market  value  to  be  figured  in  at  an  assumed  market 
value?  Will  the  attempt  so  to  do  "  raise  the  standard 
of  living  on  the  farm"  or  will  it  merely  shift  the  milk 
industry  from  one  section  to  another?  Or,  after  a 
period  of  reflection,  will  each  farmer  make  up  his 
own  mind  about  these  things  and  pay  little  heed  to 
"costs"  proved  by  "theoretical"  formulas?  The 
higher  the  price  of  milk  the  higher  the  price  for 
feeds,  and  the  higher  the  price  for  feeds,  the  higher 
the  price  for  milk.  Price  fixing  is  not  so  simple  as 
the  formula  method  implies. 

Professor  Pearson  submits  the  table  on  the  next 
page  comparing  the  price  actually  paid  in  the  Chicago 
market  from  August,  1918,  to  June,  1920,  inclusive, 
with  the  price  called  for  by  his  formula.  For  the  first 
six  months  of  this  period  the  formula  was  used  for 
price  determination.  Thereafter  it  was  not  used. 

The  following  facts  are  gleaned  from  this  table: 

(1)  During  the  seventeen  months  following  the 
abandonment   of   the   formula   method   the   price 
actually  paid  was  below  that  called  for  by  the  formula 
for  twelve  months  and  above  the  formula  price  for 
five   months.      These   five   months   were:     June, 
August  and  September,  1919,  and  June,  1920. 

(2)  The  average  price  paid  for  these  seventeen 

124 


THE  COST  OF  PRODUCTION 


months  was  $3.14  as  compared  with  $3.33  called  for 
by  the  formula,  or  roughly  one-half  a  cent  per  quart. 

(3)  For  the  months  of  August,  September  and 
October,  1919,  the  market  price  averaged  7  cents 
per  hundred  weight  above  the  formula  price. 

(4)  The  formula  price  called  for  an  increase  of 
about  10  per  cent  in  the  average  price  for  November, 
December  and  January  over  the  average  price  for 

THE  PRICE  ACTUALLY  PAID  PER  HUNDRED  POUNDS  FOR  MILK 

AND  THE  FORMULA  PRICE  FOR  MILK,  CHICAGO  DISTRICT, 

AUGUST,  1918,  TO  JUNE,  1920 


Date. 

Formula 
Price. 

Milk 
Price. 

Date. 

Formula 
Price. 

Milk 
Price. 

1018: 
August  

$2.75 

$2.75 

1919: 
July  

$2.94 

$3.00 

September 

2  92 

2  92 

August 

3  23 

3  52 

October 

3.15 

3.15 

September      .   . 

3.46 

3  55 

November  

3.65 

3.65 

October  

3.82 

3.63 

December 

3.77 

3  77 

November 

3  85 

3  60 

December  

3.88 

3.65 

1919: 
January 

3  76 

3  76 

1920: 
January 

3  88 

3  60 

February  

3.70 

3  50 

February 

3  81 

3  35 

March  

3.40 

3.00 

March  

3.70 

2.90 

April     .  .  . 

3  99 

2  80 

April 

3  40 

2  75 

May  

2.57 

2.50 

May      

2.92 

2.70 

June 

2  35 

2  50 

June 

2  66 

2  75 

the  preceding  three  months;  the  market  price  (1919) 
was  but  If  per  cent  greater. 

(5)  For  the  first  six  months  of  1920  the  price  paid 
averaged  $3.01  as  compared  with  $3.40  called  for  by 
the  formula. 

125 


THE  PRICE  OF  MILK* 

(6)  The  price  paid  for  the  last  six  months  of  1919 
was  $3.50  as  compared  with  $3.53  called  for  by  the 
formula. 

(7)  During  the  last  six  months  of  1919  and  the 
first  six  months  of  1920  the  price  paid  was  above  that 
called  for  by  the  formula  in  July,  August  and  Sep- 
tember, 1919,  and  in  June,  1920.    But  for  this  year 
as  a  whole  the  price  paid  was  $3.38  as  compared  with 
$3.33  called  for  by  the  formula,  practically  the  same, 
as  higher  prices  were  paid  in  four  months  of  higher 
production. 

The  formula  does  not  reflect  the  market  possi- 
bilities. The  sales  price  of  competitive  commodities 
and  their  costs  seldom  run  hand  in  hand.  And  one 
cannot  be  used  as  a  measure  of  the  other.  But  the 
Pearson  formula  does  reflect  in  general  what  produc- 
tion costs  are.  But  the  percentage  distribution  of 
the  cost  cannot  be  the  same  as  that  over  any  past 
period. 

To  the  extent  that  the  market  outlets  and  the 
producing  conditions  and  habits  of  any  given  region 
remain  fairly  constant  can  the  formula  method  have 
any  value  as  a  guide  to  price.  The  price  to  the 
farmer  year  in  and  year  out  will  approach  the  formula 
prices  to  the  extent  that  it  reflects  truly  both  costs 
and  marketing  conditions.  Only  in  so  far  as  an 
historical,  average,  monthly  distribution  of  prices 
happens  to  run  parallel  with  the  current  cost  and 
marketing  factors  can  a  formula  based  on  the  past 
be  accurate  at  the  present. 

We  need  continuous  reports  as  to  the  costs  and 
126 


THE  COST  OF  PRODUCTION 

net  returns  of  dairies  in  the  same  neighborhood;  as 
to  the  costs  and  net  returns  of  each  farm  product; 
as  to  costs  and  net  returns  of  the  farm  as  a  whole; 
as  to  the  relation  between  the  net  returns  of  different 
products  to  which  the  resources  of  the  farm  can  be 
turned;  and  also  the  facts  as  to  the  changes  in  farm 
output  going  on  in  any  one  region  and  the  reasons 
therefor.  This  side  of  the  science  of  farming  has 
been  neglected.  When  we  have  all  such  facts  we 
will  probably  explain  the  sound  sense  that  has  caused 
dairy  farmers  to  increase  milk  production  as  they 
have  for  certain  periods  at  prices  below  the  "costs" 
proved  by  a  formula. 

Notable  work  has  been  done  quietly  in  building 
up  efficiency  in  dairy  costs  by  J.  M.  McKee,  County 
Agent  of  Washington  County,  Pa.  By  keeping 
accurate  data  on  such  items  as  output  per  cow, 
quality  and  quantity  of  feed  consumed  per  cow,  and 
the  hours  of  labor  expended  on  the  different  dairy 
operations,  such  as  milking,  feeding,  cleaning  stables 
and  hauling  milk,  he  has  been  able  to  compare  the 
cost  items  in  each  dairy  with  the  average  cost  items 
in  all  the  dairies.  For  instance,  as  to  hours  of  labor 
including  the  hauling  of  milk,  McKee  has  found  a 
variation  of  from  159  to  231  per  cow,  with  an  average 
of  223.  He  finds  a  variation  of  from  2.1  to  6.3  pounds 
of  milk  produced  from  one  pound  of  feed,  the  average 
being  3.13  pounds  of  milk  to  1  pound  of  feed.  Out 
of  23  herds,  16  showed  a  profit  and  7  a  loss.  The 
profit  per  cow  varied  from  $95.00  profit  to  $27.65 
loss.  Mr.  McKee  has  also  done  well  one  other 

127 


THE  PRICE  OF  MILK 

thing:  he  has  computed  feed  and  overhead  costs 
and  then  given  to  each  of  the  farmers  what  his  labor 
is  netting  him  per  hour  on  the  basis  of  assumed  over- 
heads, and  he  assumes  a  given  hourly  wage  and 
reports  the  net  return  on  the  investment  at  that 
wage.  Mr.McKee  writes  the  author: 

The  dairymen  are  showing  an  increased  interest 
in  cost  of  production  records  and  what  the  price 
they  receive  will  pay  them  in  wages  per  year,  but 
to  secure  this  information  it  is  necessary  to  make 
a  study  of  the  entire  dairy  business  and  in  so  doing 
we  find  many  places  to  increase  the  efficiency  of 
production  of  the  plant  so  that  in  many  cases  they 
can  get  an  increased  wage  per  hour  through 
cheaper  production, 

Cost  of  Production 

The  cost  of  producing  milk  is  not  easily  ascer- 
tained. But  that  is  no  reason  why  it  is  not  im- 
portant. For  as  are  the  alternatives  to  the  farmer 
so  will  his  choices  be.  Every  time  a  fanner  plans 
his  crops  he  makes  those  choices. 

It  is  not  to  be  presumed  that  because  the  costs  of 
the  different  products  of  the  farm  are  inter-related 
and  their  allocation  difficult  that  the  dairyman  will 
go  on  producing  milk  without  adequate  compen- 
sation. The  mere  fact  that  he  is  growing  other 
products  every  year  gives  him  choices  as  to  what  pro- 
duct is  most  profitable  for  him. 

The  consumer  must  realize  that  standards  of  living 
must  rise  in  the  country  in  proportion  to  the  standard 
in  the  cities.  Costs  of  producing  milk  like  the  costs 

128 


THE  COST  OF  PRODUCTION 

of  producing  steel,  will  rise  as  living  standards  rise. 
Farmers  will  not  continue  to  work  the  members  of 
their  families  when  city  earners  need  not  do  so.  We 
cannot  continue  to  add  to  the  values,  profits  and 
wages  in  manufacturing  industries  and  not  bring  up 
living  standards  in  the  country  to  meet  those  in  the 
city. 

The  whole  problem  of  milk  costs  is  involved  with 
industrial  stability  and  social  well  being  not  only  in 
the  city  but  also  in  the  country — and  in  the  city  and 
in  the  country  of  all  nations. 


129 


CHAPTER  VI 

Should  Dairymen  Organize  for  Collective  Bargaining? 

There  has  been  in  recent  years  a  revolution  in  the 
method  of  receiving,  manufacturing,  storing  and  dis- 
tributing milk  and  milk  products. 

The  time  was  when  the  manufacture  of  butter  was 
solely  a  household  industry.  The  first  creamery 
built  in  the  United  States  dates  back  only  to  1856. 
Soon  after  the  Civil  War  period  small  cross-roads 
creameries  began  to  increase  in  number  throughout 
the  country.  Well  does  the  author  remember  the 
glowing  promises  made  in  the  early  "  nineties "  by 
those  organizing  local  cooperative  creamery  com- 
panies. Those  cooperative  plants  were  usually 
built  to  serve  the  dairymen  of  the  immediate  vicinity 
only. 

About  1890  the  centrifugal  separator  was  placed 
on  the  market  and  Professor  Babcock  gave  to  the 
industry  in  the  Babcock  tester  a  quick  and  reliable 
method  of  ascertaining  the  percentage  of  butter  fat 
in  milk.  Shortly  after  this,  cold  storage  on  a  large 
scale  was  perfected.  Following  the  development  of 
cold  storage  plants  on  a  large  scale  came  the  large 
butter  centralizers  such  as  the  Beatrice  Creamery 
Company,  the  Blue  Valley  Creamery  Company,  the 
Fairmount  Creamery  Company  and  the  Hanford 
Produce  Company,  the  largest  of  which  makes  from 
15,000,000  to  20,000,000  pounds  annually,  in  many 

130 


SHOULD  DAIRYMEN   ORGANIZE 

plants  widely  separated.  These  large  plants  grad- 
ually added  facilities  for  manufacturing  the  by- 
products of  skim  milk. 

Fast  on  the  heels  of  these  large  butter  concerns 
came  the  large  condenseries,  likewise  under  the  con- 
trol of  central  companies.  Such  are  the  Borden, 
Mohawk,  Helvetia,  Carnation,  and  Nestles'  Con- 
densed Milk  Companies. 

The  home  churn  and  the  cross-roads  creamery 
could  no  longer  effectively  compete  with  the  buying, 
manufacturing,  storing  and  selling  facilities  of  these 
large  concerns.  What  was  a  household  industry  had 
become  a  big  manufacturing  industry.  Charts  Nos. 
XIII  and  XIV  on  pages  132  and  133  indicate  graphi- 
cally the  expansion  of  the  butter  and  cheese  factory 
industry  at  the  expense  of  the  household  butter  and 
cheese  industry. 

In  1909,  1,619,415,263  pounds  of  butter  was  made 
in  the  United  States,  or  an  increase  over  1899  of 
8.6  per  cent.  Of  this  amount  994,639,619  pounds 
was  made  on  the  farm  and  624,764,653  pounds  in  the 
creamery.  This  was  in  ten  years  a  decrease  of  7.2 
per  cent  in  home-made  butter  and  an  increase  of 
48.7  per  cent  in  factory  butter. 

The  time  was,  and  not  so  very  long  ago,  when 
milk  was  distributed  to  the  consumer  in  the  city 
from  house  to  house  by  the  dairymen  who  produced 
it  in  the  country.  The  only  facilities  for  caring  for 
it  in  the  country  were  the  side-hill  spring  house  or 
the  cellar.  Today  in  most  cities  of  any  size  there 
are  but  a  few  large  milk  distributors.  These  dis- 

131 


THE  PRICE  OF  MILK 


CHART  No.  XIII. — FARM  AND  FACTORY  BUTTER  PRODUCTION 
IN  THE  UNITED  STATES  SINCE  18501 


J000 


/8&O       /99O        I90O        /9/O       /920 


/CO 


»  From  Circular  No.  70,  United  States  Department  /of  Agriculture,  by  John  R. 
Mohler. 

132 


SHOULD  DAIRYMEN  ORGANIZE 

CHART  No.XIV. — FARM  AND  FACTORY  CHEESE  PRODUCTION  IN 
THE  UNITED  STATES  SINCE  18501 


ieso       /G6Q         '97Q         /eeo         '890        /QOO      ./9/o 


tributors  own  receiving  stations  in  the  country  to 
which  the  milk  is  brought  direct  from  the  farm  and 
there  properly  cooled  and  cared  for  in  quantities 
sufficient  to  make  the  cooling  and  handling  cost  per 
quart  very  small.  Moreover,  the  large  distributors 
soon  added  facilities  for  economically  manufacturing, 

1  From  Circular  No.  71,  United  States  Department  of  Agriculture,  by  John  R. 
Mohler. 

133 


THE  PRICE  OF  MILK 

storing  and  selling  the  milk  products  made  from  the 
surplus  milk  for  which  no  market  could  be  found  in 
the  wholesale  or  retail  milk  trade.  The  receiving 
stations  reach  out  great  distances  from  the  cities 
served  by  the  distributors.  Until  recent  years  the 
manufacturing  of  condensed  milk  and  evaporated 
milk  was  open  to  practically  all  comers  with  but 
little  investment.  Now,  with  the  market  more  or 
less  monopolized  by  widely  advertised  brands,  pushed 
by  high  grade  sales-agents,  the  condenseries  have 
been  consolidated  until  not  over  a  half  dozen  firms 
control  the  major  output  of  the  condenseries  of  both 
Europe  and  the  United  States.  While  of  the  total 
milk  produced  in  this  country  the  portion  going  into 
condenseries  (2.9  per  cent)  is  small,  the  strategic 
location  of  these  plants  and  their  importance  in 
handling  surplus  milk  in  those  weeks  of  the  autumn 
and  spring  when  condensed  milk  offers  a  better 
market  for  milk  products  than  do  butter  or  cheese, 
gives  to  the  few  large  condensing  companies  with 
receiving  stations  scattered  in  every  large  dairy  dis- 
trict a  position  of  f orcefulness  in  price  determination 
throughout  most  of  the  year. 

With  the  development  of  these  large  industrial 
units  came  heavy  investments  both  in  the  city  and 
in  the  country  that  had  to  be  protected.  These 
investments  were  made  in  order  to  handle  milk  and 
its  products  most  economically.  One  source  of 
economy  was  the  choice  of  favorable  locations  for 
receiving  plants  in  order  that  they  might  be  supplied 
with  the  volume  of  milk  necessary  to  low  cost  per 

134 


SHOULD   DAIRYMEN   ORGANIZE 

unit  handled.  Thus,  it  has  come  about  gradually 
that  in  any  one  dairying  community  there  is  now 
usually  but  one  readily  accessible  receiving  station 
at  which  the  producer  can,  within  a  reasonable  haul, 
find  a  sale  for  his  milk. 

These  investments  made  possible  the  proper  care 
and  handling  of  milk,  and  provided  the  most  econom- 
ical method  of  manufacturing,  storing  and  selling  it. 
Hence  through  them  came  to  the  farmer  and  to  the 
consumer  the  possibilities  of  a  more  favorable  price 
through  lower  costs  of  receiving,  manufacturing, 
distributing  and  selling  milk  and  its  products. 

But  this  change  had  left  only  one  good  near-by 
market  open  to  the  farmer.  When  the  producer 
saw  that  the  result  of  this  revolution  in  dairying, 
just  described,  was  that  his  only  market  for  selling 
his  milk  to  good  advantage  was  the  local  receiving 
station  of  a  large  milk  factory  or  milk  distributor, 
he  began  to  grow  restless  concerning  the  power  of 
these  buyers  to  dictate  the  price  he  must  accept  for 
his  milk.  Thanks  to  American  traditions,  the  pro- 
ducers began  to  question  the  fairness  of  the  price 
they  received  even  though  that  price  was  more  than 
they  could  get,  or  could  have  gotten,  or  had  ever 
received,  in  any  other  way.  There  was  a  more  or 
less  actual  monopoly  to  which  the  producer  must  sell 
his  milk.  The  producer  therefore  joined  with  other 
producers  to  protect  his  price,  hence  the  "Dairy- 
men's Organization"  now  present  in  every  primary 
milk  market  in  the  United  States. 

In  the  face  of  such  conditions  it  is  obviously  to  the 
135 


THE  PRICE  OF  MILK 

best  interests  of  all  that  there  should  be  such  farmers' 
organizations.  The  purchasing  power  confronting 
the  producer,  if  not  organized,  was  thoroughly  cen- 
tralized, because  purchasers  were  few  in  any  district. 
In  many  instances,  if  not  in  most  instances,  the 
price  proffered  the  farmer  in  the  years  preceding 
these  organizations  was  without  doubt  not  a  fair 
price. 

Even  if  the  price  proffered  by  these  milk  buyers  be 
the  fairest  of  prices,  it  is  still  to  the  interests  of  the 
buyers  themselves  that  milk  producers  should  be 
thoroughly  organized.  For  through  collective  bar- 
gaining the  producers  feel  that  they  are  a  party  to 
the  price  and  hence  suspicion  and  gossip — the  twin 
slayers  of  business  security — cease  to  be.  The  best 
price  interpreter  to  all  farmers  is  the  farmer  who 
has  had  a  "say"  in  determining  the  price  to  be  paid 
for  milk  by  local  buyers. 

A  dairymen's  organization  manned  by  fair-minded 
farmers  is  an  asset  to  the  large  buyer  under  present- 
day  conditions.  In  any  case,  so  long  as  American 
blood  stays  American,  in  the  face  of  practically  a 
buying  monopoly,  such  organizations  are  going  to  be. 

What  are  the  Functions  of  Dairymen's  Organizations? 

The  first  function  of  dairymen's  organizations,  of 
course,  is  to  bargain  as  to  price.  Often  it  has  been 
said  that  "the  law  of  supply  and  demand  must  fix 
the  price."  But  when  the  only  buyer  in  a  district 
offers  a  price  to  one  producer  here  and  another 
producer  there,  and  only  the  buyer  sees  all  the 

136 


SHOULD  DAIRYMEN   ORGANIZE 

individuals  and  the  individuals  never  see  each  other, 
is  the  law  of  supply  and  demand  fixing  the  price  or 
is  the  will  of  the  buyer  fixing  the  price?  Before  the 
law  of  supply  and  demand  can  be  operative,  the 
buyer  and  seller  must  each  have  alternatives  and 
equal  bargaining  power.  Under  the  conditions  indi- 
cated above  this  is  possible  only  when  all  the  sellers 
sell  as  one  man  to  the  one  buyer.  The  law  of  supply 
and  demand  pre-supposes  competition  among  buyers 
as  well  as  among  sellers  if  a  fair  price  is  to  be  reached. 
But,  as  has  been  shown,  the  milk  buyer  now  usually 
possesses  a  monopoly  power  which  must  be  matched 
by  the  organized  selling  power  of  the  producers. 
Otherwise,  neither  the  consumer,  the  producer  nor 
the  dealer  can  know  that  the  price  is  fair. 

But  there  are  numerous  duties  of  dairymen's 
organizations,  other  than  bargaining  as  to  price. 
One  is  to  get  and  maintain  shipping  facilities  that 
many  can  secure  which  one  cannot;  another  is  to 
look  after  milk  tests;  another  is  to  find  and  keep 
open  the  necessary  markets.  Much  good  is  being 
done  by  such  organizations,  through  cooperation  with 
those  who  buy,  to  expand  the  market  for  milk  by 
advertising  and  by  creating  and  keeping  good  will. 
Then,  too,  net  profits  will  increase  by  lowering  pro- 
duction costs  as  well  as  by  increasing  selling  prices. 
In  feed  and  labor  matters  much  can  be  and  is  being 
done  by  central  organizations  of  dairymen.  Fur- 
thermore, new  markets  must  be  found  to  meet  new 
conditions. 

All  these  and  other  functions  are  best  rendered  by 
137 


THE  PRICE  OF  MILK 

the  farmers  themselves  to  the  farmers  themselves 
through  their  own  representatives.  Thus  and  thus 
only  are  the  producers'  interests  fully  protected. 

Should  these  Organizations  be  Exempt  from  the  Anti- 
Trust  Statutes? 

The  purpose  of  the  anti-trust  statutes  is  to  assure 
a  fair  price  to  the  consumer  and  producer  and 
dealer  by  keeping  open  the  avenues  of  trade.  The 
spirit  of  our  institutions  favors  competition. 

The  essence  of  competition  is  the  free  bargain 
between  a  willing  seller  and  a  willing  buyer.  The 
seller  is  not  a  "willing"  seller  in  any  economic  sense 
of  the  word  unless  his  power  to  sell  is  equal  to  the 
power  of  the  buyer  to  buy.  This  is  possible  as  to 
milk  under  present  milk-market  conditions,  only 
when  the  producers  are  organized.  The  same  eco- 
nomic forces  that  our  law-makers  and  courts  recog- 
nized in  collective  bargaining  for  laborers  argue  for 
legalized  collective  bargaining  for  dairymen. 

Moreover,  the  investment  now  necessary  for  milk 
distribution  in  a  city  of  any  size  can  be  protected 
only  if  the  owner  thereof  knows  what  his  competitor 
is  paying  for  milk.  Otherwise  price  competition  in 
the  city  is  at  the  expense  of  the  farmer  and  hence  at 
the  risk  of  a  proper  supply  of  milk  for  the  consumer. 
The  same  forces  that  made  it  advisable  that  all 
railway  rates  be  made  public  now  make  it  advisable 
that  the  price  paid  for  milk  be  made  public. 

But  may  the  dairymen  not  abuse  their  freedom 
from  prosecution  for  conspiracy  to  restrain  trade? 

138 


SHOULD  DAIRYMEN   ORGANIZE 

They  may.  The  author  has  known  of  a  few  instances 
where  the  privilege  of  immunity  from  prosecution 
under  the  anti-trust  statutes  of  a  given  state  has 
been  abused  by  the  officers  of  a  dairy  organization. 
But  when  organized  100  per  cent  the  power  of  the 
farmer  is  not  greater  than  is  the  power  of  those  to 
whom  he  sells  before  he  organizes.  We  may  by  law 
enforcement  prevent  many  farmers  from  cooperating 
to  get  a  fair  price.  We  cannot  by  any  device  known 
to  law  successfully  prevent  the  few  buyers  in  any 
one  milk  market  from  coming  to  a  common  under- 
standing as  to  the  price  they  will  pay  for  milk, 
especially  when  the  buyers  are  few  and  large  invest- 
ments are  at  stake.  Shall  we  prohibit  the  farmers 
from  combining  to  protect  their  interests  when  we 
cannot  prevent  the  milk  buyers  from  combining? 

It  is  not  advisable  that  either  should  be  prevented. 
It  is  to  the  public  interest  that  milk  production 
should  have  the  protection  that  can  come  only 
through  equality  of  bargaining  power.  Moreover, 
it  is  to  the  public  interest  that  the  centralized  power 
of  the  milk  distributor  be  checked  and  balanced  by 
an  organization  of  equal  power  among  producers. 
The  abuses  that  may  arise  from  collective  bargaining 
may  be  checked  in  many  ways.  These  abuses  are 
neither  so  numerous  nor  so  destructive  as  those  that 
arise  when  dairymen  are  not  organized,  and  the 
latter  abuses  cannot  be  checked  by  any  means. 

But,  if  collective  bargaining  is  allowed,  may  we 
not  have  a  great  "  producer-distributor "  trust  that 
would  set  its  own  prices  without  consideration  of 

139 


THE  PRICE  OF  MILK 

the  interests  of  the  consumer?  Those  who  read  the 
preceding  chapters  will  learn  of  many  forces  other 
than  bargaining  power  that  really  determine  the  price 
of  milk.  To  be  effective  a  "  producer-distributor " 
combination  would  have  to  include  not  only  a  con- 
trolling number  of  all  producers  and  all  distributors, 
but  of  all  manufacturers  of  milk  products  and  of  the 
producers  and  sellers  of  alternative  foods  to  the 
extent  that  the  price  for  such  foods  affect  the  price 
for  milk.  When  such  a  combination  shows  promise, 
the  proper  agencies,  mainly  national  and  inter- 
national, will  soon  be  created  to  meet  it.  In  such  a 
combination  the  organized  dairvmen  would  be 
playing  only  a  very  small  part. 

Collective  bargaining  of  any  kind  should  be  in  the 
open  and  all  agreements  kept  on  record.  Some  of 
the  essentials  to  this  in  milk  prices  are  discussed  in 
the  chapter  on  " Cooperation  and  Price/'  The 
whole  tendency  of  the  times  is  to  get  fair  prices 
through  administrative  supervision  of  price  matters 
and  not  through  the  old,  inept,  ineffective  judicial 
processes  lamely  attempting  to  prevent  restraint  of 
trade.  The  consumer's  long  time  interests  can  be 
protected  in  ways  other  and  more  effectively  (as 
shown  in  Chapter  XII)  than  by  preventing  coop- 
erative organizations  among  farmers  through  anti- 
trust statutes. 

The  truth  is  that  exemption  of  such  organizations 
from  those  statutes  allows  fair  bargaining;  the  want 
of  exemption  compels  unfair  bargaining.  For  where 
there  is  no  exemption  the  milk  buyer  either  fixes  his 

140 


SHOULD  DAIRYMEN  ORGANIZE 

own  price  or  he  meets  with  the  farmers  to  agree  on 
prices  only  so  long  as  it  is  to  his  own  interests  so 
to  do.  For,  when  it  is  not  to  the  interests  of  the 
buyer  so  to  do,  the  buyer  pictures  to  the  producer 
the  penalties  of  the  conspiracy  statutes  and  names 
his  own  prices. 

Under  such  conditions  the  American  public  will 
conclude  to  exempt  bargaining  associations  of  dairy- 
men from  anti-trust  statutes. 


141 


CHAPTER  VII 

Policies  of  Dairymen's  Organizations  in  Their  Relation 
to  Price 

Certain  questions  as  to  the  methods  and  policies 
of  these  organizations  have  such  a  direct  bearing  on 
price  both  to  the  farmer  and  to  the  consumer  that 
it  is  well  now  to  consider  them.  These  questions 
are: 

1.  Around  what  market  (local,  primary,  national 
or  international)  should  these  societies  be  organized? 

2.  Is  the  strike  the  method  to  be  used  to  secure 
fair  prices? 

3.  Can  the  interests  of  consumers  be  protected  as 
well  as  the  interests  of  producers  and  dealers? 

4.  Does  the  formula  afford  a  practical  method  of 
price  fixing? 

5.  Should  such  organizations  own  and  operate 
their  own  receiving,  distributing  and  manufacturing 
facilities? 

1.  Around  What  Market  Should  These  Societies  Be 
Organized? 

The  Chapter  on  "The  Interdependence  of  Local, 
Primary,  National  and  International  Markets "  de- 
picts the  degree  of  dependence  and  independence 
between  each  of  these  markets.  As  there  pointed 
out,  the  primary  market  is  the  one  that  is  most 
nearly  independent  of  the  other.  Within  a  given 

142 


POLICIES  OF  DAIRYMEN'S  ORGANIZATIONS 

primary  market  the  competitive  forces  are  such  as 
to  tend  to  make  unity  of  price  essential.  As  between 
primary  markets  there  are  seasonal  and  marketing 
conditions  that  necessitate  price  differences.  The 
national  and  international  markets  blend  into  one 
during  the  season  of  plentiful  production,  because 
the  sales  value  of  manufactured  products  is  to  a  large 
degree  international. 

These  being  the  facts  as  to  price  forces  in  each  of 
these  classes  of  markets,  it  is  clear  that  the  type  of 
organization  that  will  best  meet  conditions  is  one 
independent  dairymen's  organization  in  each  of  the 
primary  markets,  these  to  be  federated  into  a 
national  (and  in  time  international)  organization 
that  will  meet  the  national  and  international  issues 
on  their  merits. 

The  author  has  seen  many  instances  when  local 
organizations  within  a  primary  market  have  sought 
to  maintain  a  price  for  whole  milk  for  one  town  or 
city  above  the  price  prevailing  in  the  primary 
market.  The  successes  of  those  organizations  have 
been  transient.  The  very  existence  of  such  dairy 
organizations  has  depended  upon  the  overshadowing 
protection  of  the  larger  organization  in  the  primary 
market.  Often  such  local  associations  have  been 
harmful  to  the  interests  of  even  their  own  members. 
The  unit  is  too  small  to  be  effective.  One  sound 
principle,  alike  of  price  or  rate  regulation  as  well  as 
of  collective  bargaining,  is  that  the  regulating  or 
bargaining  power  should  be  coextensive  with  the 
industrial  organization  to  be  regulated  or  bargained 

143 


THE  PRICE  OF  MILK 

with.  Thus  state  regulation  of  transcontinental 
carriers  or  city  regulation  of  state-wide  street  rail- 
way systems  inevitably  prove  to  be  impotent,  or, 
if  not  impotent,  unfair. 

The  "milk-sheds"  separating  the  primary  milk 
markets  are  known  to  the  trade  and  can  be  easily 
observed.  Often  where  the  territories  are  not  de- 
fined by  transportation  barriers  there  are  customary 
divisions  of  territory  among  the  milk  purchasers, 
which  afford  a  basis  for  a  division  of  territory  among 
dairymen's  organizations.  The  primary  market 
offers  the  only  logical  basis  for  separate  dairy  organi- 
zations. 

It  has  been  urged  that  these  associations  should 
unite  into  one  national  organization  whose  repre- 
sentatives would  meet  the  representatives  of  milk 
purchasers  monthly  at  some  central  place,  such  as 
Chicago,  and  then  arrive  at  a  base  price  for  the 
United  States  as  a  whole,  with  customary  or  agreed 
differentials  between  the  primary  markets.  The 
author  has  never  believed  that  this  plan  was  for  the 
best  interest  of  all  parties  for  many  reasons.  Those 
who  sell  and  those  who  buy,  whether  dealers  or 
consumers,  want  to  know  that  their  "own  people" 
are  influential  in  price  matters.  Even  if  the  price 
to  the  farmer  were  higher  through  a  national  price- 
fixing  conference,  there  will  be  better  satisfaction 
in  the  long  run  if  these  matters  are  determined  at 
"home"  by  "home  folks."  The  trade  customs 
making  a  primary  market  for  milk  determine  a 
primary  market  for  other  products  and  hence  the 

144 


POLICIES  OF  DAIRYMEN'S  ORGANIZATIONS 

people  in  these  markets  are  ''home  folks "  in  a  mar- 
keting sense.  Accordingly  the  meeting  held  in  these 
markets  are  sufficiently  near  "home"  to  satisfy  all 
parties  and  allay  suspicion  as  to  unfair  price  methods 
or  conclusions.  Neither  the  farmers,  the  dealers, 
nor  the  consumers  in  Louisville,  Kentucky,  want 
their  prices  determined  for  them  (however  wisely  or 
justly  it  may  be  done)  in  Cleveland.  Nor  will  the 
citizens  of  New  York  want  their  prices  arranged  in 
Boston  or  Chicago.  Moreover,  those  familiar  with 
the  forces  in  a  primary  market  should  bargain  in  that 
market.  No  "foreign"  price  will  ever  satisfy  those 
who  buy  and  sell  on  a  primary  market. 

Differing  climatic  conditions  and  variation  in  pro- 
ducing or  marketing  output  will  necessitate  a  con- 
stant change  in  any  system  of  price  differentials 
between  the  primary  markets. 

"But,"  it  is  urged,  "the  butter,  condensing  and 
other  milk  manufacturers  who  have  factories  or  re- 
ceiving stations  in  the  different  primary  markets 
play  one  low  market  against  another  to  keep  all 
markets  down  and  hence  the  dairymen's  organization 
in  any  one  primary  market  is  helpless  to  defend  itself 
without  help  from  similar  organizations  in  other 
markets."  In  this  argument  there  is  much  that  is 
sound.  A  manufacturer  with  a  receiving  station  in 
the  Chicago  district  will  not  want  to  pay  a  higher 
price  there  than  he  pays  at  his  receiving  stations  in 
the  Los  Angeles,  Seattle,  Pittsburgh  or  Boston  dis- 
tricts, and  he  will  make  this  clear  enough  by  many 
means  to  the  farmers  in  the  Chicago  district.  It  is 

10  145 


THE  PRICE  OF  MILK 

to  meet  such  conditions  that  a  federation  of  dairy- 
men's organizations  is  needed.  In  addition  to 
organizations  performing  the  many  functions  essen- 
tial to  each  primary  market,  a  central  clearing  house 
is  needed  to  meet  the  joint  needs  of  two  or  more 
primary  markets.  In  the  surplus  production  months 
this  central  organization  might  well  assume  advisory 
price  functions,  for  in  those  months  the  price  factors 
are  largely  national  or  international.  In  other  words, 
the  organization  of  dairymen's  unions  should  be 
mobile  enough  to  meet  the  needs  of  local,  primary, 
national  and  international  markets.  A  federation  of 
the  associations  in  the  primary  markets  offers  a  type 
of  organization  adaptable  to  all  these  purposes.  It 
is  no  accident  that  this  is  just  the  type  that  is  now 
in  operation, 

2.  Is  the  Strike  the  Method  To  Be  Used  to  Secure  Fair 
Prices? 

Many  questions  of  sales  policies  have  been  the 
center  of  public  interest  throughout  the  few  years 
that  dairymen  have  been  organized.  Dairymen  or- 
ganized to  right  wrongs.  Often  the  "fire-eater" 
among  the  dairymen  of  a  given  district  was  chosen 
to  represent  that  district.  Force  was  the  chief  idea 
expressed  and  strikes  were  the  first  means  used.  So 
it  was  with  labor  organizations.  The  new  labor  union 
wants  first  of  all  to  show  its  strength.  The  leaders 
of  some  dairymen's  unions  believe  that  strikes  bring 
new  members. 

Contrasted  with  this  view  is  the  other  policy,  in 
146 


POLICIES   OF  DAIRYMEN'S   ORGANIZATIONS 

the  application  of  which  the  Philadelphia  and  Pitts- 
burgh dairy  groups  are  examples,  namely,  never  to 
talk  strike  but  secure  results  in  other  ways.  Neither 
the  milk  producers  nor  the  milk  dealers  have  ever 
said  they  would  never  refuse  to  buy  nor  to  sell  but 
these  ideas  are  never  voiced  in  any  of  their  price 
conferences.  The  idea  of  violence  or  of  threat  has 
been  wholly  absent  in  both  these  buying  and  selling 
groups.  On  the  contrary  each  side  assumes  (and 
now  believes)  that  the  other  wants  a  fair  business 
settlement.  The  result :  fair  settlements  are  secured, 
not  without  much  discussion,  and  sometimes  only 
after  much  feeling  is  aroused,  but  for  three  years  at 
least  every  price  agreement  has  been  unanimous  and 
both  sides  have  been  convinced  that  the  price  was 
fair.  The  conclusion  reached,  both  sides  then  co- 
operate to  expand  the  market  and  to  improve  pro- 
ducing, buying  and  selling  conditions. 

Centuries  of  accumulated  experience  have  taught 
all  these  in  power  in  government  or  industry  that  the 
use  of  strikes  or  lockouts  is  an  evidence  only  of  the 
want  of  a  higher  ability  on  the  part  of  those  who  use 
them.  It  may  not  be  wise  under  some  circumstances 
to  advertise  that  these  methods  will  never  be  used, 
but  it  is  recognized  that  their  use  even  if  "necessary  " 
is  usually  evidence  of  weakness  and  want  of  ability 
on  the  part  of  those  who  use  them.  The  best  labor 
leaders  have  for  years  stopped  using  violence  and 
are  finding  more  successful  methods.  For  in  any 
collective  bargaining  among  equals,  a  point  is  reached 
sooner  or  later  where  the  power  is  first  with  one 

147 


THE  PRICE  OF  MILK 

group,  then  with  the  other.  If  one  group  abuses 
power  when  it  has  it,  the  other  group  will  be  inclined 
to  do  the  same  when  in  turn  power  comes  to  it. 
Therefore,  when  bargaining  relations  are  to  be  per- 
manent, as  astute  labor  and  industrial  leaders  recog- 
nize, force  is  never  idly  threatened  and  its  use  is 
accepted  by  the  leaders  themselves  as  evidence  of 
poor  leadership.  Neither  group  will  conclude  never 
to  strike  nor  to  lockout,  but  they  will  conclude  that 
these  means  prove  destructive  more  often  than  they 
prove  beneficial. 

The  need  is  to  attain  real  equality  in  bargaining 
power.  Power  to  bargain  implies  the  power  to 
refuse  to  buy  or  to  sell.  There  can  be  no  quibbling 
about  this.  The  only  question,  therefore,  is  not 
whether  dairymen  shall  never  refuse  to  sell  nor  deal- 
ers refuse  to  buy  but  whether  other  methods  will 
be  exhausted  before  such  refusal  is  made.  Dairy- 
men have  been  told  so  often  what  price  they  "can 
take  or  leave"  that  their  first  impulse  is  to  do  the 
same  when  power  is  in  their  hands. 

In  the  chapter  on  "Cooperation  and  Price"  a 
method  of  price  agreement  is  described  in  which 
the  power  to  refuse  to  buy  or  to  sell  including  the 
power  to  name  a  price  without  a  conference  which 
the  other  must  take  or  leave,  gives  way  as  a 
policy  to  mutual  cooperation  and  understanding. 

3.  Can  the  Interests  of  Consumers  Be  Protected  as  Well 
as  the  Interests  of  Producers  and  Dealers? 

Can  farmers  and  milk  dealers  adopt  price  policies 
148 


POLICIES  OF  DAIRYMEN'S  ORGANIZATIONS 

that  will  protect  the  consumers'  interests  as  well  as 
their  own?  The  consumers'  interests  require  a  price 
that  will  maintain  production  and  provide  the  costs 
and  profits  essential  to  the  economical  distribution 
of  milk  with  adequate  sanitary  protection  for  the 
milk  from  the  farm  to  the  pantry.  Because  of  the 
character  of  milk  as  a  protective  food,  the  consumer 
is  also  interested  in  a  price  as  stable  as  producing 
conditions  will  warrant.  In  summer  time  the  leafy 
vegetables  may  offer  an  adequate  alternative  to  the 
protective  food  elements  found  most  cheaply  and 
surely  in  milk.  But  in  the  autumn  and  winter  those 
leafy  foods  are  high  in  price  as  well  as  scarce.  Hence 
chief  reliance  in  these  months  must  be  placed  upon 
milk.  From  the  point  of  view  of  social  welfare, 
therefore,  the  price  of  milk  in  winter  should  not  vary 
more  from  the  summer  price  than  is  necessary  to 
stimulate  autumn  production.  Moreover,  the  resent- 
ment that  a  high  seasonal  price  fluctuation  brings  to 
the  consumer  leads  to  cutting  down  the  consumption 
of  milk  in  winter.  This  does  not  mean  exactly  the 
same  price  to  farmer  or  to  consumer  throughout  the 
year,  but  it  does  mean  that  there  are  clearly  defined 
points  beyond  which  the  price  of  milk  to  the  con- 
sumer should  not  fluctuate  as  between  winter  and 
summer. 

Thus,  during  the  war  period,  consumption  was  not 
diminished  by  an  increase  of  two  cents  per  quart  in 
the  price  of  milk  when  the  Food  Administration  said 
that  that  increase  was  fair,  whether  the  increase  was 
from  twelve  to  fourteen  cents  or  from  thirteen  to 

149 


THE  PRICE  OF  MILK 

fifteen  cents.  Indeed,  wth  the  support  of  the  Food 
Administration  in  many  places,  consumption  was 
not  reduced  at  all  when  such  price  increases  were 
made.  But  a  price  increase  in  any  one  autumn  or 
winter  of  as  much  as  four  cents  per  quart  over  the 
low  price  during  the  previous  summer,  however,  has 
invariably  met  with  distinct  opposition  and  marked 
decrease  in  consumption.  The  only  exceptions  to 
this  rule  were  the  few  months  in  the  autumn  of  1918 
when  the  influenza  epidemic  was  on — an  exception 
that  tends  to  prove  the  rule. 

A  stabilized  price  is  essential  to  good  loads  on 
retail  milk  wagons  and  maintenance  of  equipment  at 
full  capacity,  and  these  are  the  primary  factors, 
both  in  keeping  down  costs  to  consumers,  as  will  be 
shown  later,  and  in  assuring  adequate  annual  profits 
to  milk  dealers. 

Good  health  requires  habitual  use  of  milk  and  a 
habit  of  using  milk  keeps  down  the  cost  of  handling 
milk  per  unit,  thus  stimulating  consumption  and 
increasing  the  farmer's  market.  A  fairly  uniform 
price  is  conducive  to  the  habit  of  using  milk. 

This  stabilizing  of  price  to  the  consumer  cannot 
be  done  without  the  cooperation  of  the  selling  organi- 
zation among  farmers.  A  short-sighted  policy  may 
lead  farmers'  organizations  to  whang  prices  as  high 
as  possible  in  the  few  months  that  milk  is  short,  quite 
forgetting  that  when  this  is  done  it  is  but  human  and 
necessary  for  those  who  buy  their  milk  to  whang  the 
prices  as  low  as  possible  in  the  months  when  milk 
is  plentiful.  Quite  forgetting,  too,  what  is  to  their 

150 


POLICIES   OF  DAIRYMEN'S   ORGANIZATIONS 

interest,  that  when  milk  consumption  goes  down 
because  of  extreme  fluctuations  in  price,  the  number 
of  months  in  which  the  farmers  can  control  the 
whole  milk  market  is  to  that  extent  lessened. 
Cooperation  here  between  buyers  and  sellers  will 
benefit  both. 

A  monthly  price  distribution  that  stabilizes 
prices  to  the  consumer  is  to  the  advantage  of  the 
producer  who  sells  market  milk.  The  new  com- 
mercial possibilities  in  reconstituted  milk  will  help 
stabilize  the  price.  The  use  of  powdered  milk  was 
in  the  author's  opinion  much  lower  the  autumn  of 
1918  than  it  would  have  been  had  the  government 
not  taken  practically  all  the  supply  for  military 
purposes.  Even  as  it  was  there  was  a  large  use  of 
it.  In  its  use  lies  the  check  to  a  monthly  distribution 
in  the  future  price  to  farmers  that  upsets  consumption 
by  necessitating  abnormal  seasonal  increases  in  price. 

Price  stabilization  to  the  consumer  also  means 
that  the  milk  dealer  in  the  summer  time  must  have 
a  spread  wide  enough  to  create  reserves  against  the 
lean  months  of  the  autumn.  This  again  necessitates 
close  cooperation  among  dealers  as  well  as  between 
farmers  and  dealers,  and  between  consumers  and 
dealers.  To  this  end,  too,  daylight  delivery  which 
satisfies  laborers  is  a  contributing  factor. 

Stabilization  does  not  mean  that,  on  a  year  round 
basis,  the  farmers  with  whole  milk  markets  will  get 
less  for  their  milk;  it  means  they  will  get  more,  for 
there  is  more  milk  produced  in  the  spring  and  sum- 
mer than  in  the  autumn  and  winter  months. 

151 


THE  PRICE  OF  MILK 


The  chart  below  shows  the  monthly  distribution 
by  per  cents  of  the  annual  price  that  has  actually 
prevailed  for  the  periods  noted  in  the  New  York, 
Philadelphia,  Pittsburgh,  and  Chicago  markets. 


JAN      ree      tw      APR      MAY     JUNE     JULY      AU&      stPT      CCT       MOV      DI 

t 

120 
110" 

100 
90 

80 
TO 

*x,. 

\ 

x\. 

& 

1^' 
* 

100 
90 

do 

TO 

\ 

^S 

\\ 

\ 

N 

k\  \ 

,  >x 

// 
If 
*'j 

12. 

y 

H 

\ 

£ 

\ 

/i  f 

,„-» 

7 

V 

V 

\\ 
* 

\ 

^/ 
\ 

-fHILADELPHIA. 
----NEW  YORK 
—  PITX5DURG 
CHICAGO 

\ 

// 

1 

CHART  No.  XV. — THE  AVERAGE  MONTHLY  VARIATION  IN  THE 

AVERAGE  ANNUAL  PRICE  RECEIVED  BY  MILK  PRODUCERS 

IN  THE  NEW  YORK,  PHILADELPHIA,  PITTSBURGH1 

AND  CHICAGO  MILK  MARKET  DISTRICTS  FOR 

THE  TEN- YEAR  PERIOD  ENDING  IN  1916 

An  examination  of  this  chart  will  show  that  the 
milk  producers  in  the  Philadelphia  district  through 
this  ten-year  period  received  a  slightly  lower  price 
than  producers  in  the  other  leading  milk  markets  for 
January  and  December  and  a  higher  price  in  May, 

*  For  nine  years  ending  January  1,  1919. 

152 


POLICIES  OF  DAIRYMEN'S  ORGANIZATIONS 

June  and  July.  Inasmuch  as  much  more  milk  is 
produced  in  the  latter  group  of  months  than  in  the 
former  group  of  months,  the  net  annual  money 
return  to  dairymen  in  the  Philadelphia  district  has 
been  as  high  as  the  net  returns  to  dairymen  in  the 
other  districts. 

This  market  custom  the  producers  in  the  Phila- 
delphia district  have  kept  during  and  since  the  war 
period.  This  constitutes  their  contribution  to  a 
favorable  retail  milk  price  situation  in  the  Philadel- 
phia district.  Without  this  cooperation  from  the 
producers,  Philadelphia  consumers  would  have  had 
to  pay  higher  prices  than  they  did  pay  in  the  fall  and 
winter  months  and  hope  for  lower  prices  in  summer 
months.  Under  this  latter  plan  the  average  paid  by 
consumers  for  the  year  would  have  been  higher  even 
if  the  farmers'  net  returns  had  been  the  same,  because 
of  the  upset  business  conditions  for  the  city  milk 
distributor.  To  accept  this  policy  required  faith  by 
producers  that  public  officials,  milk  consumers  and 
milk  buyers  would  not  rush  out  to  lower  the  price 
to  the  producer  when  they  would  have  the  power  to 
do  so  in  the  season  of  greatest  production  to  a  point 
below  that  warranted  by  a  fair  consideration  of 
sacrifices  already  made  by  the  producer  to  stabilize 
prices  to  consumers.  In  other  words,  the  producers 
had  to  refrain  from  "getting  all  they  could  get" 
when  milk  was  scarce  in  return  for  assistance  to 
maintain  a  fair  average  price  through  the  rest  of  the 
year,  especially  during  the  months  of  greatest  pro- 
duction. 

153 


THE  PRICE  OF  MILK 


How  this  plan  worked  out  in  practice  is  shown  in 
the  chart  below  comparing  the  prices  received  by 
the  milk  producers  at  the  country  receiving  station 
during  the  calendar  year  1918  in  the  New  York, 
Philadelphia,  Pittsburgh,  Cleveland  and  Chicago 
districts. 


500 
400 

300 

200 
1QQ 

JAN       fTB          MAR         APR        MAY        JUNE       JULY         AU&        SCfT        OCT          NOV        DEC 

500 
400 

S 

~rr.t. 

v 

S 

'--  —  '-r 

/ 
<'''? 

fr 

*****  —  ' 

•^- 

^ 

^ 

.•^T^V 

^  s 

7-4* 

•0 

'? 

?£---"' 

''-PHILADELPHIA 
NEW  YORK 
•—  PITXSBURG 
CHICAGO 
—  CLEVELAtfB 

200 

100 

^.^ 

,s 

CHART  No.  XVI. — THE  PRICE  RECEIVED  BY  MILK  PRODUCERS 

AT  COUNTRY  RECEIVING  STATIONS  DURING  1918  IN  THE 

NEW  YORK,  PHILADELPHIA,  PITTSBURGH,  AND 

CHICAGO  PRIMARY  MARKET  DISTRICTS 

As  pictured  by  this  chart,  the  annual  price  re- 
ceived by  the  farmers  in  the  Philadelphia  district  in 
1918  averaged  as  high  as  that  received  by  producers 
in  any  primary  milk  market.  Giving  consideration 

154 


POLICIES  OF  DAIRYMEN'S  ORGANIZATIONS 

to  the  higher  price  received  by  Philadelphia  farmers 
during  the  seasons  of  greatest  production,  the  milk 
producers  in  this  district  during  1918  received  for 
the  year  as  a  whole  the  highest  net  money  return 
received  by  producers  in  any  primary  market. 

The  risk  taken  by  Philadelphia  producers  in  thus 
helping  to  stabilize  the  price  to  the  consumer  is 
shown  in  the  chart  on  page  156  comparing  the  prices 
received  by  Philadelphia  producers  from  January  1, 
1919,  to  June,  1920,  with  the  price  received  in  that 
year  by  New  York,  Pittsburgh,  and  Chicago  pro- 
ducers. 

An  examination  of  this  chart  will  show  that  for 
most  of  the  year  the  monthly  prices  to  producers  in 
the  Philadelphia  district  averaged  well  in  1919  with 
the  monthly  prices  in  other  primary  markets.  In 
December,  however,  Philadelphia  producers  were 
receiving  one  cent  per  quart  less  than  producers  in 
the  New  York,  Pittsburgh  and  Baltimore  districts. 
The  same  inequity  continued  in  January  of  1920. 
In  other  words,  the  price  to  consumers  in  Philadel- 
phia would  have  been  one  cent  a  quart  higher  than 
it  was  had  those  producing  milk  in  that  territory 
received  as  high  a  price  as  milk  producers  in  other 
territories  were  receiving  for  those  months. 

Plans  were  made  early  in  1920  for  maintaining  the 
price  paid  to  farmers  in  the  Philadelphia  district 
through  which  the  price  to  the  Philadelphia  producers 
by  June  1,  1920,  averaged  as  high  as  that  received 
by  producers  elsewhere  on  an  annual  basis.  The 
price  of  milk  to  the  consumer  did  not  rise  over  14 

155 


THE  PRICE  OF  MILK 

cents  per  quart  in  Philadelphia  as  compared  with  a 
rise  to  18  cents  per  quart  in  New  York  City. 


\919                                                                                                               1420 

AM            r«»           HAft          APfl          MAT         JUNt          JUIY           AUO         JIPT          OCT           M>           t)CC            JAN.          TC&         MAft         APR          H*/         ju«^ 

w\ 

\ 
i^v 

\ 

',. 

-y 

-^ 

s. 

^ 

****/ 

^ 

^ 

^ 

^•^^ 

/' 

•ft 

C^~- 

^ 

/ 

*~"^ 

>y 

> 

"X 

\ 

\ 

5 

/  '  ^ 

\ 

\ 
\ 
\ 

/. 

/ 

^ 

-^ 

£- 

PI 

' 

T 

flLADELPHIA 
MEW  YORK 
'ITTSBURG 
CHICAGO 

CHART  No.  XVII. — PRICE  PAID  FOR  MILK  AT  COUNTRY  RECEIVING 

STATIONS  IN  THE  NEW  YORK,  PHILADELPHIA,  PITTSBURGH, 

AND    CHICAGO    PRIMARY    MARKET    DISTRICTS, 

JANUARY   1,    1919,   TO   JUNE,    1920 

The  price  to  the  producer  has  been  fairly  stabilized 
in  the  Philadelphia  and  Pittsburgh  markets.  The 
price  to  the  consumer  has  also  been  fairly  stabilized. 
The  result  is  a  market  wholesome  for  producers, 
satisfactory  to  dealers  and  a  price  fair  to  consumers. 

One  valid  objection  to  price  stabilization  to  pro- 
ducers is  that  the  price  to  winter  producers  may 
not  be  sufficiently  above  the  price  to  summer  pro- 
ducers to  encourage  production  in  the  seasons  of 

156 


POLICIES  OF  DAIRYMEN'S  ORGANIZATIONS 

greatest  cost.  To  overcome  this  objection  milk 
sellers  and  buyers  in  the  Baltimore  district  worked 
out  a  plan  for  paying  winter  producers  a  higher 
price  throughout  all  the  season  of  plentiful  produc- 
tion so  that  on  the  basis  of  the  total  annual  income 
winter  production  would  be  maintained  if  not  in- 
creased. Beginning  in  January  of  1920,  a  similar 
plan  was  adopted  in  the  Philadelphia  district. 

Under  the  Philadelphia  arrangement  the  average 
monthly  production  of  each  producer  for  the  months 
of  October,  November  and  December  is  taken  as  his 
"basic"  production.  For  this  amount  of  milk  for 
each  month  thereafter  the  producer  receives  a 
"basic"  price.  He  also  receives  the  base  price  on 
10  per  cent  above  this  average  monthly  production 
during  May,  June  and  July,  and  for  5  per  cent  above 
his  basic  output  in  August.  Quantities  of  milk 
produced  above  these  amounts  receive  a  "surplus" 
price  which  is  below  the  basic  price.  This  surplus 
price  is  based  on  the  daily  average  price  of  New 
York  92  score  solid  pack  butter  for  the  month  pre- 
ceding, plus  20  per  cent.  In  this  last  named  respect 
the  Philadelphia  plan  differs  materially  from  the 
Baltimore  plan.  In  the  Baltimore  district  the  sur- 
plus price  is  determined  by  negotiations  from  month 
to  month  in  which  all  factors  figure,  including  the 
price  of  butter.  In  both  plans  new  shippers  come 
in  during  any  month  other  than  October,  November 
or  December1  on  the  basis  of  50  per  cent  surplus  and 
50  per  cent  basic. 

1  And  September  in  the  Baltimore  District. 

157 


THE  PRICE  OF  MILK 

To  illustrate,  farmer  "A"  produced  2100,  2000 
and  1900  pounds  of  milk  in  October,  November  and 
December  respectively.  His  basic  production  is 
2000  pounds  for  these  three  months.  In  May  he 
produced  2500  pounds.  He  receives  the  basic  price 
for  2200  pounds  and  the  surplus  price  for  300  pounds. 
If  butter  of  the  quality  stated  above  averages  60 
cents  a  pound  in  May  he  is  paid  for  these  300  pounds 
at  120  per  cent  of  60  cents,  or  72  cents  per  pound  of 
his  butter  fat,  or  $2.88  per  hundred  weight  for  4  per 
cent  milk  at  the  receiving  station  door.  The  20 
per  cent  is  allowed  for  overrun  and  the  value  of 
skim  milk.  The  basic  price  has  to  be  related  to  the 
value  of  milk  both  for  whole  milk  consumption  and 
manufacturing.  The  average  of  both  must  allow 
the  average  manufacturer  to  make  a  fair  profit, 
otherwise  he  would  be  driven  out  of  the  territory. 
The  plan  for  this  reason  is  not  adaptable  to  primarily 
manufacturing  markets. 

The  basic  price  in  the  Philadelphia  territory  was 
$3.61  from  January  1  to  June  1,  1920;  the  surplus 
price  was  $3.12,  $3.18,  $3.19,  $3.43,  $3.00  and  $2.76 
for  January,  February,  March,  April,  May  and  June 
respectively,  an  average  of  $3.11.  With  a  surplus 
of  one-third,  the  producer  actually  received  for  this 
period  an  average  of  $3.46.  The  winter  producer 
receives  a  higher  average  price,  however,  than  does 
the  producer  in  seasons  of  lower  cost.  The  price  to 
the  consumer  is  stabilized  with  resultant  advantages 
of  a  wider  market  to  producers,  a  stable  trade 
situation  for  distributors,  a  satisfactory  price  to 

158 


POLICIES  OF  DAIRYMEN'S   ORGANIZATIONS 

consumers  and  a  fair  price  to  manufacturers.  The 
longer  experience  of  the  Baltimore  market  and  this 
season's  experience  in  the  Philadelphia  market  bear 
testimony  to  good  results  from  this  plan.  Other 
organizations,  such  as  the  New  England  Milk  Pro- 
ducers' Association,  have  adopted  or  are  considering 
similar  plans.  The  objections  to  the  plan  lie  with 
the  manufacturers.  To  meet  these  objections  equi- 
table considerations  must  be  used. 

It  should  not  be  inferred  that  the  author  recom- 
mends the  Philadelphia  plan  for  all  districts  or 
under  all  conditions.  The  Pittrburgh  Plan  is  to 
negotiate  each  month's  price,  in  conference,  for  all 
the  milk  as  discussed  in  Chapter  XIV.  An  exam- 
ination of  the  three  preceding  charts  will  show  that 
the  price  to  producers  in  the  Pittsburgh  district  has 
reflected  normal  market  conditions  and  a  whole- 
some variation  between  summer  and  winter  costs. 
Pittsburgh  is  primarily  a  manufacturing  district. 
Price  stabilization  to  the  consumer  in  the  Pitts- 
burgh district  has  been  accomplished  through  a  wider 
spread  to  the  dealer  in  spring  and  summer  than  in 
the  autumn  and  winter  months,  and  through  a 
variation  of  from  one  to  two  cents  per  quart 
between  the  price  to  the  consumer  in  summer  and 
in  winter. 

4.  Does  the  Formula  Afford  a  Practical  Method  of 
Price  Fixing? 

While  the  formula  as  described  in  Chapter  V  is 
valuable  when  used  with  other  facts  in  gauging  pro- 

159 


THE  PRICE  OF  MILK 

duction  costs,  the  use  of  a  formula  for  actual  price 
fixing  without  any  consideration  of  other  factors  in 
milk  prices  is  so  silly  that,  if  it  were  set  to  music, 
it  would  make  good  comic  opera.  Every  business  on 
any  annual  basis  must  pay  its  costs  plus  a  profit. 
But  what  business  man  would  succeed  who  at- 
tempted to  distribute  the  prices  at  which  he  sold 
his  goods  exactly  by  per  cents  by  months  on  the 
basis  of  what  he  had  actually  received  on  a  ten-year 
previous  average? 

The  advantages  and  limitations  of  the  formula 
method  for  fixing  prices  are  illustrated  in  the  use  of 
the  Hoover  hog  price  formula  during  the  war  period. 
In  November  of  1917,  with  the  avowed  purpose  of 
stimulating  production,  assurance  was  given  hog 
producers  that,  so  far  as  the  Food  Administration 
could  effect  foreign  buying  of  pork  products,  the 
Food  Administration  would  endeavor  to  maintain  a 
price  per  pound  for  hogs  in  the  ratio  to  the  price  of 
corn  of  13  to  1.  This  price  stimulated  hog  produc- 
tion during  the  two  years  following.  But  peace 
negotiations  and  the  approach  of  the  armistice 
alarmed  holders  of  corn,  particularly  because  of 
statements  receiving  wide  circulation  at  the  time  as 
to  large  accumulations  of  low-priced  corn  in  Argen- 
tine and  South  Africa  to  be  made  available  to  the 
world's  markets  at  once  with  shipping  released.  The 
result  was  a  break  in  the  price  of  corn  of  from  30  to 
40  cents  per  bushel.  This  break  (when  incorporated 
in  an  average  of  the  corn  prices  for  the  previous  five 
months  settled  upon  as  a  basis  for  calculating  the 

160 


POLICIES  OF  DAIRYMEN'S  ORGANIZATIONS 

price  of  hogs  on  the  13  to  1  ratio),  indicated  a  fall 
in  the  price  of  hogs  even  though  the  price  of  corn 
should  later  rally.  The  rails  were  soon  congested 
with  hogs  half  fat  and  hogs  not  fit  for  market.  The 
market  in  hogs  taken  alone  did  not  justify  such  a 
break  in  hog  prices.  But  with  one  of  many  price 
factors  alone  (corn  price)  determining  hog  prices 
and  the  market  itself  omitted,  producers  were  justi- 
fied in  sacrificing  their  stock.  A  conference  was  held 
in  Washington  with  the  live  stock  committee  and 
the  formula  abandoned  as  a  sole  factor  in  prices. 

It  is  noteworthy  in  this  connection  that  the  formula 
method  for  price  determination  in  milk  was  aban- 
doned just  as  soon  as  the  Food  Administration  was 
dissolved. 

Something  similar  to  this  formula  method  in  other 
industries  is  the  sliding  scale  plan  for  regulating 
profits  and  prices  in  certain  quasi-public  utilities 
where  there  is  a  complete  monopoly.  Thus  the  Con- 
solidated Gas  Company  of  Boston  was  to  have  a 
profit  of  7  per  cent  on  an  agreed  valuation  so  long 
as  gas  sold  at  90  cents  per  1000  cubic  feet  to  the 
consumer,  but  8  per  cent  when  gas  sold  at  85  cents 
and  9  per  cent  when  gas  sold  at  80  cents  per  1000 
cubic  feet.1  Stockholders  immediately  interpreted 
this  contract  to  mean  that  they  were  entitled  to  9 
per  cent.  The  consumer  received  gas,  therefore,  at 
80  cents.  So  far  all  were  happy.  The  sequel  is 
found  in  a  report  of  the  Public  Service  Commission 
of  Massachusetts  after  the  plan  had  been  in  oper- 

>  See  King,  Clyde  L.      "Regulation  of  Municipal  Utilities."     D.  Appleton  Co. 

11  161 


THE  PRICE  OF  MILK 

ation  a  number  of  years.  The  managers  of  the 
plant  could  not  maintain  the  plant  in  good  condition, 
pay  9  per  cent  dividends  and  still  sell  gas  at  but  85 
cents.  They  therefore  robbed  the  plant.  The 
public  was  finally  presented  with  a  plant  worn  out 
and  obsolete,  with  the  time-old  query:  "What  are 
you  going  to  do  about  it?"  The  plan  failed  because 
there  was  no  such  constant  ratio  as  the  formula 
necessarily  assumed  between  operating  costs  and  the 
price  of  the  product. 

A  similar  fallacy  lies  in  the  plan  to  create  a  separate 
wage  board  to  state  what  shall  be  a  fair  wage  to  rail- 
way employees,  leaving  to  another  commission  the 
power  to  state  what  is  a  fair  rate.  On  the  surface 
this  seems  fair.  Are  we  to  deny  a  fair  wage  to  the 
employee  or  a  fair  rate  to  the  companies?  But  if 
the  sum  of  the  two  gives  a  rate  more  than  the  traffic 
will  bear,  what  then?  Continue  to  subsidize  the 
two  groups  from  taxation? 

During  the  Food  Administration  a  proposal,  hap- 
pily defeated,  was  persistently  pushed  whereby  one 
department  was  to  decide  what  was  a  fair  price  to 
milk  producers,  another  the  fair  spread  for  milk 
distributors,  the  total  to  be  the  price  to  the  con- 
sumer. "Are  you  to  deny,"  it  was  argued,  "cost 
plus  a  fair  profit  to  producers  or  to  dealers?"  Cer- 
tainly not.  But  what  if  the  price  to  the  consumer 
thus  arrived  at  was  more  than  both  producers  and 
distributors  knew  to  be  wise  in  order  to  keep  their 
market  wholesome?  And  what  if  consumers  do  not 
take  all  the  milk  offered  at  this  "just"  price?  Are 

162 


POLICIES  OF  DAIRYMEN'S  ORGANIZATIONS 

we  to  make  up  the  deficits  from  taxation,  thus  doing 
away  with  all  incentive  to  economies,  to  plant  im- 
provement, to  elimination  of  useless  costs? 

Prices  are  not  a  simple  case  of  mathematics. 

Such  are  the  limitations  of  the  use  of  the  formula 
method.  Its  advantages  lie  in  its  simplicity  of 
application  when  the  facts  are  agreed  upon  and  in 
the  foundation  facts  which,  thanks  to  long  years  of 
patient  research,  the  formula  reflects  concerning  the 
amounts  of  feeds  and  of  labor  necessary  to  produce 
100  pounds  of  milk  in  the  cow  factory.  As  a  guide 
it  is  useful,  and  great  credit  is  due  to  Professor  Pear- 
son and  others  who  have  made  it  practical. 

By  whatever  method  the  cost  of  producing  milk 
is  reckoned,  that  cost  alone  is  not  the  sole  factor  in 
determining  the  price  at  which  it  can  be  sold  /or 
any  given  month.  If  a  farmer  does  get  all  his  costs 
and  a  profit  will  he  produce  milk  if  he  can  produce 
some  other  commodity  at  a  larger  profit  or  secure  a 
higher  and  better  living  standard  in  other  work? 
Will  one  region  stop  producing  milk  because  the 
living  standards  possible  thereby  are  not  as  high  as 
in  other  farming  regions,  though  milk  production 
offers  the  best  returns  of  any  product  to  the  farmers 
in  the  first  region? 

Milk  production  costs  and  net  returns  are  most 
valuable  when  they  can  be  compared  with  the  costs 
and  net  returns  of  other  alternatives  on  the  farm, 
and  when  they  are  compared  with  the  net  profits  of 
the  farm  taken  as  a  whole  and  with  living  standards 
possible  to  earners  in  other  industries.  Under  cer- 

163 


THE  PRICE  OF  MILK 

tain  conditions  it  will  pay  better  to  plow  clover  under 
as  a  fertilizer  than  to  make  clover  hay  and  feed  live 
stock.  Assuming  that  from  both  uses  the  farmer 
gets  his  costs  and  a  profit,  which  he  will  follow  if 
the  one  offers  larger  net  returns  than  the  other  in 
the  long  run?  With  the  same  field  crops  the  farmer 
has  the  choice  of  milk,  beef  and  pork  production. 
Assuming  for  each  he  can  get  back  all  his  costs, 
which  will  he  choose? 

Here  is  a  farmer  in  a  good  grain  producing  region. 
May  he  decide  to  keep  a  dairy  herd  sufficient  to 
consume  all  his  roughage  and  retain  the  fertilizer 
for  his  farm  even  though  the  daily  net  return  derived 
from  his  work  in  the  autumn  and  winter  months 
may  not  be  as  large  as  the  return  from  his  labor  at 
the  seed  time  and  harvest  of  his  grains? 

Will  a  farmer  expect  the  same  money  wage  for 
himself  during  the  autumn  and  winter  months  that 
he  will  expect  from  his  seasonal  crops?  The  farmer 
living  near  a  city  will  want  a  standard  of  wages  and 
of  hours  for  himself  and  his  family  comparable  to 
those  in  the  city.  Does  this  standard  reach  back 
into  the  real  dairy  districts?  Just  how  much  is  the 
time  of  the  farmer  worth  during  the  six  months  that 
he  is  not  planting  or  harvesting?  What  is  the  labor 
of  his  family  worth  at  harvest  times?  At  other 
times? 

The  principles  concerned  are  similar  (and  no  more 
difficult  of  application)  than  they  are  in  determining 
the  price  for  gas  or  electric  current  at  "peak"  de- 
mand. The  price  for  "off-peak"  demand  is  lower 

164 


POLICIES  OF  DAIRYMEN'S  ORGANIZATIONS 

but  yet  this  "  off-peak "  must  bear  a  proper  share  of 
all  the  overheads  and  all  direct  labor  costs.  What 
this  "proper"  share  is  must  depend  upon  whether 
the  major  portion  of  the  business  is  in  short  hour 
residence  lighting  or  in  full  day  manufacturing. 
Likewise  milk  production,  on  a  farm  where  the  dairy 
is  not  the  sole  source  of  income,  must  bear  its  proper 
share  of  overheads  and  all  the  direct  labor  costs. 

Dairying,  when  economically  and  wisely  prac- 
ticed, is  intermixed  with  the  system  of  cropping 
adapted  to  the  neighborhood.  In  view  of  the  most 
economical  distribution  of  labor  and  the  need  for  a 
cash  income  monthly,  and  in  view  of  a  hundred  other 
factors  that  commingle  to  make  farming  the  most 
exacting  of  sciences,  the  price  for  one  product  may  be 
below  cost  and  another  above  it,  yet  a  combination 
of  the  two  may  still  net  the  highest  return.  When 
the  prices  for  a  period  are  such  as  to  discourage 
dairying  for  a  period  and  the  farmers  turn  to  some- 
thing else,  more  than  cost  plus  profit  will  be  needed 
to  reestablish  dairying  in  that  district.  It  takes 
decades  to  train  a  whole  community  in  the  fine  art 
of  producing  milk. 

5.  Should  Dairy  Organizations  Own  and  Operate  Their 
Own  Receiving,  Distributing  and  Manu- 
facturing Facilities? 

As  to  the  questive  of  cooperation  ownership,  dairy 
organizations  have  had  but  little  experience  directly 
pertinent  to  the  matter  and  of  sufficient  duration  to 
be  a  real  test. 

165 


THE  PRICE  OF  MILK 

The  best  example  of  favorable  results  of  cooper- 
ative ownership  by  dairymen  of  milk  manufacturing 
and  distributing  facilities  is  the  recent  experience  of 
the  Associated  Dairymen  of  California  formed  in 
1917  from  a  federated  association  of  eight  units,  or 
local  associations.  Several  local  units  have  since 
been  added,  and  others  are  in  process  of  formation. 
The  central  organization  studies  marketing  in  a 
broad  way  to  help  the  local  cooperative  factories 
find  the  best  outlet  for  their  milk  products.  The 
milk  factories  themselves  are  operated  by  the  local 
associations,  although  the  central  body  is  active  in 
developing  modern  and  uniform  methods  in  all 
plants.  By  this  means  all  factories  are  assisted  in 
turning  out  a  standard  product,  sale  of  which  will  be 
pushed  by  a  wide  campaign  of  advertising.  To 
meet  capital  expenditures,  dairymen  members  are 
assessed  in  proportion  to  the  size  of  their  herds,  but 
operating  expenses  are  paid  out  of  receipts  from  the 
sale  of  the  product. 

The  arguments  for  the  cooperative  ownership  by 
dairymen  of  milk  manufacturing  and  distributing 
facilities  run  as  follows: 

In  the  regions  supplying  whole  milk  markets,  the 
surplus  must  be  manufactured  into  milk  products, 
the  price  for  which  is  determined  by  a  supply  and 
demand  over  which  the  local  farmers  have  no  con- 
trol. Inasmuch  as  the  whole  milk  market  offers  the 
best  price  market,  these  surplus  products  must  be 
either  manufactured  by  the  milk  dealer  at  a  loss  to 
be  underwritten  by  the  consumer  of  whole  milk  as 

166 


POLICIES   OF  DAIRYMEN'S   ORGANIZATIONS 

insurance  for  an  adequate  seasonal  supply,  or  the  ( 
price  must  come  down  to  the  level  where  milk  can 
be  profitably  manufactured.  The  whole  milk 
dealers,  it  is  argued,  use  a  small  surplus  to  beat  down 
the  price  on  all  the  milk  supply.  This  means  an 
unfair  price  to  the  producers.  Therefore,  the  pro- 
ducers, to  get  that  price  to  which  the  price  paid  by 
the  consumer  fairly  entitles  them,  and  to  get  a  price 
needed  to  compensate  for  the  higher  autumn  and 
winter  costs  of  producing  milk  for  a  year  round 
market,  must  own  the  facilities  for  manufacturing 
their  own  summer  surplus.  Otherwise  the  "surplus" 
is  forever  fixing  the  price. 

The  argument  for  cooperative  ownership  and 
operation  of  milk  manufacturing  plants  by  the  pro- 
ducers in  districts  primarily  manufacturing,  and  for 
owning  and  operating  the  distributing  systems  in 
such  districts,  is  chiefly  to  get  all  the  market  offers 
or  can  be  made  to  offer  from  both  the  manufactured 
milk  product  and  from  the  consumers  of  whole  milk. 
Fundamental  to  belief  in  cooperative  ownership  is 
the  recognition  of  the  fact  that  the  price  to  the 
farmer  is  what  is  left  after  the  middleman's  costs 
and  profits  have  been  taken  from  the  consumer's 
price.  The  purpose  of  such  ownership  is  to  secure 
as  large  a  share  of  those  profits  as  possible  for  the 
producer. 

All  will  sympathize  with  this  point  of  view.  The 
real  question  is  whether  a  cooperative  sales  organi- 
zation, or  a  cooperative  oivning  and  operating  organi- 
zation, or  a  combination  of  the  two,  will  best  secure 

167 


THE  PRICE  OF  MILK 

these  results.  There  are  conditions  under  which 
such  cooperative  ownership  and  management  will 
no  doubt  bring  better  net  returns  to  milk  producers 
than  they  are  now  securing.  But  under  ordinary 
conditions  the  author  concludes  that  best  results 
will  be  secured  through  the  cooperative  sales  organi- 
zations. The  following  facts  and  reasons  compel  one 
to  such  a  conclusion: 

In  the  first  place  investments  are  now  in  existence 
for  the  purpose  of  receiving  and  handling  milk. 
These  properties  will  either  have  to  be  duplicated  or 
purchased.  The  wastes  of  duplication  are  apparent 
as  shown  by  the  history  of  not  only  gas,  electric, 
street  railway  and  other  public  utilities  but  by  many 
private  industries  as  well.  To  be  run  economically 
each  milk  plant  must  have  that  volume  of  milk 
essential  to  economical  operation.  Duplication  pre- 
vents this  and  thus  adds  to  the  very  cost  of  handling 
which  the  producer  desires  to  lower  by  ownership. 

If  the  properties  are  purchased,  the  poorly  located 
plants  will  be  on  sale  first  at  reasonable  prices.  If 
the  poorly  located  plants  are  purchased,  the  pro- 
ducers are  at  once  put  at  a  disadvantage  just  because 
of  their  poor  location.  If  the  best  located  plants 
are  purchased,  the  voluntary  sale  price  (condem- 
nation proceedings  cannot  be  used)  will  include  the 
earning  power  of  this  plant  in  relation  to  other 
plants  which  may  or  may  not  be  desirable.  For  the 
farmers  of  any  district  or  of  any  nation  to  put  in- 
vestments into  such  plants  larger  than  are  necessary 
in  other  districts  or  in  other  nations  is  to  place  such 

L168 


POLICIES  OF  DAIRYMEN'S  ORGANIZATIONS 

farmers  at  a  distinct  handicap  in  selling  their  pro- 
ducts at  a  price  that  will  maintain  their  investments. 
To  ruin  existing  investments  by  establishing  com- 
petitive plants  in  order  to  purchase  them  at  a  more 
reasonable  price  or  in  order  to  force  a  manufacturer 
to  "come  to  terms/'  is  to  launch  on  a  policy  that, 
bPprtufcltflcBy,  will  have  doubtful  issue.  Moreover, 
to  be  effective,  cooperative  investments  of  this  kind 
must  be  sufficient  to  sell  all  the  milk  off  eredvor  manu- 
facture it  into  that  product  which  will  bring  the  most 
favorable  price.  To  do  this  is  not  as  simple  as  it 
sounds.  It  seems  easy  to  say  to  the  milk  purchaser: 
"Take  what  you  want  for  sale  to  whole  milk  con- 
sumers at  the  price  we  set  and  we  will  handle  all  you 
do  not  want  in  our  own  plant  or  plants  at  our  own 
cost  and  risks. "  But  really  to  handle  supplies  ad- 
vantageously is  not  easy.  Is  the  plant  to  be  main- 
tained as  a  permanent  plant  or  as  an  "emergency 
plant "  solely?  Is  it  to  keep  its  own  force  all  the 
time?  Suppose  the  price  should  be  high  enough  to 
stimulate  greater  production,  is  the  dealer  or  the 
farmer  to  handle  this  excess  supply?  Will  the 
whole  milk  dealer  go  beyond  the  district  to  get  the 
milk  he  needs  in  the  scarce  season,  thus  avoiding  the 
expense  of  surplus  in  the  surplus  season,  placing 
that  expense  on  the  farmers?  To  be  effective  will 
the  producers  not  have  to  own  the  plant  equipment 
sufficient  to  care  for  all  the  milk  of  any  primary 
market?  Then  what  will  be  the  relation  of  the  price 
in  this  primary  market  to  prices  in  other  primary  or 
national  or  international  markets? 

169 


THE  PRICE  OF  MILK 

The  large  condensing  and  butter  interests  today 
have  receiving  stations  and  manufacturing  facilities 
in  many  primary  markets.  It  is  easy  for  these 
large  concerns  to  keep  the  price  to  producers  high 
enough  in  a  local  territory  competing  with  a  cooper- 
ative plant  to  ruin  the  cooperative  investment.  The 
large  concern  can  make  up  any  such  local  deficit  by 
lower  prices  elsewhere.  This  producers  cannot  and 
will  not  do. 

Nor  is  this  all.  Milk  is  most  economically  handled 
by  that  company  equipped  to  turn  to  any  product 
that  at  the  time  offers  the  best  market.  Creameries 
and  milk  distributing  plants  or  ice  cream  plants  are 
not  most  economically  operated  as  independent 
units.  The  skim  milk  of  the  creamery  can  either  be 
fed  to  hogs  or  made  into  casein  or  into  various 
varieties  of  cheese;  or  it  can  be  made  into  milk 
powders  to  store  for  making  ice  cream  or  whole  milk 
later.  With  the  sale  of  bottled  milk  retail  can  go 
the  sale  of  butter,  cheese,  eggs,  ice  cream,  and  of 
sweet  or  sour  cream.  It  takes  a  highly  specialized 
milk  marketing  organization  to  get  the  best  prices 
for  all  the  milk  products.  The  cooperative  organi- 
zation must  compete  with  such  organizations.  This 
means  highly  specialized  full  time  managers.  To  be 
sure  farmers  may  employ  these.  The  point  is  that 
the  cooperative  manufacturing  plants  must  have 
output  enough  to  make  such  employment  econom- 

A  principle  of  law  stipulates  that  he  who  buys  on 
commission  should  not  retail.  The  purpose  of  the 

170  • 


POLICIES  OF  DAIRYMEN'S    ORGANIZATIONS 

law  is  to  keep  single  the  interests  of  the  agent. 
If  the  agent  is  also  a  retailer  he  is  no  longer  interested 
in  gaining  the  highest  price  possible  for  those  for 
whom  he  acts.  In  the  same  sense  the  selling  agent 
of  milk  should  remain  solely  a  selling  agent.  When 
he  also  becomes  a  manufacturer  his  purposes  are  no 
longer  single.  He  must  make  money  on  his  manu- 
factured products.  This  means  a  price  to  the 
producer  low  enough  to  allow  him  a  profit  on  his 
manufactured  products.  If  the  agent  is  not  as 
economical  a  manufacturer  or  as  good  a  sales  agent 
as  professional  manufacturers  are,  the  members  of 
the  cooperative  producers'  organization  must  take 
the  consequence  either  in  lower  prices  for  milk  or  in 
the  risk  to  their  investments.  In  the  history  that 
has  led  to  the  bankruptcy  of  many  a  cooperative 
concern  lies  eloquent  testimony  to  this  fact. 

If  it  be  well  for  producers  to  own  and  operate  their 
own  plants  by  all  means  such  organization  should  be 
separate  from  cooperative  selling  organizations. 

In  the  mind  of  the  author  the  interests  of  all  will 
best  be  served  by  a  cooperative  selling  organization 
that  sets  out  to  use  every  avenue  available  in  its 
district  to  sell  the  milk  through  the  best  existing 
avenues.  A  good  marketing  channel  today  or  this 
season  may  not  be  the  best  the  next  day  or  the  next 
season.  For  the  present  at  least,  full  and  complete 
utilization  of  the  investments  in  existence  offers  a 
safe  and  permanent  policy  for  organized  dairymen. 
Exceptions  to  this  rule  will  be  made,  of  course, 
where  a  fair  bargain  can  not  be  made.  The  facts 

171 


THE  PRICE  OF  MILK 

as  to  the  costs  of  manufacturing  and  distributing 
milk  are  now  available  and  hence  the  fairness  of 
the  bargain  as  to  prices  on  milk  can  be  measured. 
If  the  producers  can  not  get  a  fair  bargain  then 
they  must  own  and  operate  their  own  manufactur- 
ing and  distributing  plants,  as  a  last  means  of  self- 
preservation, 

Collective  bargaining,  as  to  milk  prices,  has  come 
to  stay.  The  policies  adopted  can  be  such  that 
collective  bargaining  will  protect  at  once  the  long 
time  interests  of  efficient  producers  and  distributors 
and  likewise  protect  the  best  interests  of  consumers. 


172 


PART  II 

The  Cost  of  Distributing  Milk 


CHAPTER  VIII 

The  Cost  of  Milk  Distribution 

To  understand  the  relative  cost  factors  in  milk 
distribution  one  must  first  review  the  steps  in  the 
process  of  getting  milk  from  the  dairy  to  the  con- 
sumer. 

Milk  must  be  cooled  on  the  farm.  This  cost  the 
farmer  usually  stands,  though  sometimes  a  premium 
is  paid  by  the  milk  dealer  for  milk  properly  cooled. 
Usually  at  whole  milk  receiving  stations  the  milk  is 
rejected  if  it  is  sour  because  it  is  not  properly  cooled, 
and  in  this  way  the  farmer  pays  the  cost  of  neglect 
for  properly  cooling  his  milk. 

Transportation  costs  from  the  farm  to  the  railway 
or  receiving  stations  are  commonly  paid  by  the 
farmer.  Sometimes,  however,  the  dealer  hauls  the 
milk  and  deducts  from  the  price  to  the  dairymen  this 
cost  of  hauling  the  milk.  Because  of  the  economies 
in  hauling  in  larger  quantities,  the  net L  hauling  costs 
to  the  farmer  when  the  milk  buyer  hauls  the  milk 
and  deducts  the  jcost  therefor  is  logger-,  than  it  would 
be  if  the  farmer  hauled  his  milk  himself .  Were  this 
not  the  case  the  dairymen  would  continue  to  haul 
individually.  To  get  the  savings  in  larger  loads 
many  dairymen  cooperate  to  hire  their  milk  hauled 
or  take  turns  in  hauling  it. 

The  hauling  cost  varies  with  the  distance,  quantity 
and  character  of  the  roads.  For  a  twenty-mile  haul 

175 


THE  PRICE  OF  MILK 

a  charge  of  from  ten  to  fifty  cents  per  hundred  weight 
can  be  regarded  as  typical.  The  cans  for  this  haul 
are  usually  owned  by  the  farmers,  though  occasionally 
furnished  by  the  dealer,  in  which  case  some  allow- 
ance for  this  expense  is  deducted  from  the  price  to 
the  farmer. 

In  general  the  costs  borne  immediately  by  the 
milk  distributor  begin  at  the  country  receiving 
station.  Here  the  milk  must  be  measured  or  weighed, 
tested  for  fat  content,  if  bought  on  that  basis,  cooled 
and  loaded  into  freight  cars  for  shipment  to  the  city. 

The  country  milk  station,  in  addition  to  being  a 
center  for  receiving,  cooling,  canning  and  shipping 
milk,  may  also  have  the  equipment  necessary  for 
one  or  more  of  the  following  services:  separating 
cream,  manufacturing  butter,  cheese,  condensed 
milk,  casein,  milk  sugar  or  milk  powder.  Occasion- 
ally these  stations  are  equipped  to  pasteurize  and 
bottle  milk. 

Then  follows  the  freight  or  express  charge  to  the 
city.  The  freight  cars  must  be  iced  in  many  months 
of  the  year,  a  charge  either  borne  directly  by  the 
milk  company  or  included  in  the  freight  rates 
whether  the  rates  be  by  the  car  load  or  for  less  than 
the  car  load. 

Upon  arrival  at  the  city  freight  station,  the  cans 
must  be  unloaded  into  trucks  or  wagons  and  hauled 
to  the  bottling  and  pasteurizing  plant.  In  rare 
instances  the  pasteurizing  and  bottling  is  done  at 
the  country  plant.  The  larger  city  dealers  now  fre- 
quently maintain  facilities  at  one  or  more  of  their 

176 


THE  COST  OF  MILK  DISTRIBUTION 

country  plants  for  manufacturing  their  surplus  milk, 
though  most  dealers  still  provide  such  facilities  at 
their  city  plants. 

When  the  milk  reaches  the  city  plant  it  is  unloaded 
upon  a  platform  where  it  is  weighed  and  tested, 
certainly  for  sourness,  and  increasingly  for  butter 
fat,  if  this  test  was  not  made  at  the  country  receiving 
station.  Selected  milks  are  set  aside  for  their 
special  uses.  The  milk  is  then  clarified,  pasteurized, 
chilled  and  bottled.  Thereupon  the  bottled  milk 
goes  into  a  cold  storage  room  until  loaded  on  the 
retail  or  wholesale  wagon  for  delivery.  Laboratories, 
used  for  preparing  certain  modified  milks,  are  an 
additional  expense.  Then  there  is  the  loss  in  broken 
bottles,  the  shrinkage  in  handling,  the  loss  in  sour 
milk  returned,  bad  debts  and  the  donations  regarded 
as  necessary  to  good  will. 

That  portion  of  the  price  to  the  consumer  that 
goes  to  the  distributor  for  costs  and  profits  is  called 
the  "spread."  This  word,  however,  is  not  always 
used  to  include  the  same  costs.  Sometimes  it  in- 
cludes the  costs  from  the  time  the  milk  is  delivered 
to  the  receiving  station  until  it  reaches  the  consumer^ 
The  table  on  pages  178  and  179  gives  for  the  New 
York  City  district  for  pasteurized  milk  by  months  for 
the  year  1918 :  (a)  the  price  to  the  producer  150  miles 
out  (the  point  agreed  on  during  that  year,  beyond 
which  freight  would  be  deducted  and  within  which 
freight  would  be  added)  for  milk  testing  three  per 
cent  butter  fat,  the  basis  to  which  the  differential  of 
40  cents  per  100  pounds  is  added  to  the  producers' 

12  177      y 


THE  PRICE  OF  MILK 


I 


3s 


s 

•-3 


i 


g 

I 


i8 

C5 


_!_ 

J 


i 

8 


4 
i 


ii 


8 


178 


THE  COST  OF  MILK  DISTRIBUTION 


5 1  • 


i 

s 


s 


t>>  t^ 

•  COW 


'    *O         •    CO    Ui    I 

i  o     •  esl  co  i 


llliiii 


l 


S  8 


s 


b&: 


ill. 


:  a 


iiilll 


i 


1 


II 


I: 


179 


THE  PRICE  OF  MILK 

price  for  butter  fat;  (6)  the  price  the  producer 
received  on  the  basis  of  the  actual  butter  fat  content 
from  month  to  month;  (c)  the  price  to  the  consumer 
for  Grade  "B"  milk  pasteurized,  bottled  and  deliv- 
ered to  the  door;  (d)  the  spread  to  the  dealer  from 
the  receiving  station  located  just  150  miles  out 
(the  spread  would  be  larger  by  the  freight  if  beyond 
150  miles  and  lower  if  within  150  miles)  on  the  basis 
of  (1)  3  per  cent  milk  and  (2)  on  the  basis  of  butter 
fat  actually  paid  for.  The  spread  on  the  basis  of  the 
actual  butter  fat  of  the  average  of  all  milk  is  given 
also  (e)  for  Grade  "A"  milk.  Grade  "A"  is  but  a 
small  percentage  of  all  the  milk  delivered  as  the 
most  of  the  milk  sold  in  New  York  City  is  Grade 
"B."  The  price  at  which  Grade  "B"  milk  is  sold 
loose  to  the  stores,  (/)  and  the  price  per  quart,  (jr) 
at  which  this  milk  is  sold  dipped  to  the  consumer  by 
the  stores  is  included  as  is  (h)  the  price  delivered 
to  hotels  and  restaurants  in  can  lots. 

From  1901  to  1915  inclusive,  the  price  of  milk  to 
the  consumer  in  Philadelphia  was  8  cents  per  quart. 
The  following  table  shows  for  this  period  the  pro- 
portion of  this  8  cents  that  went  to  the  dairyman 
and  to  the  distributor.  The  price  to  the  farmer  is 
the  price  f.  o.  b.  Philadelphia.  The  spread  to  the 
dealer  in  this  instance  is,  therefore,  for  the  costs  and 
profits  from  the  time  the  milk  was  delivered  to  the 
city  until  it  was  delivered  to  the  consumer.  Trans- 
portation, cooling  and  hauling  costs  should  be  de- 
ducted from  the  price  given  for  the  farmer  in  order 
to  get  the  net  price  on  the  farm. 

180 


THE  COST  OF  MILK  DISTRIBUTION 

During  this  period  milk  was  not  bought  by  test. 

PROPORTION  OP  CONSUMER'S  PRICE  OP  EIGHT  CENTS  PER  QUART 

THAT  WENT  TO   THE   FARMER   AND   TO   THE   DISTRIBUTOR 
FROM    1901   TO    1915   INCLUSIVE,    PHILADELPHIA 


Yearly  Average. 

1901. 

1902. 

1903. 

1904. 

1905. 

1906. 

1907. 

1908. 

Price  to  farmer,  f  .  o.  b.  Philadel- 

phia                       

$0  035 

$0  04 

$0  04 

$0  039 

$0.038 

$0  0408 

$0  043 

$0  038 

Spread  to  distributor 

.045 

.04 

.04 

.041 

.042 

.0392 

.037 

.042 

Yearly  Average. 

1909. 

1910. 

1911. 

1912. 

1913. 

1914. 

1915. 

Price  to  farmer,  f.  o.  b.  Phila- 
delphia 

$0  04 

$0.041 

$0  0408 

$0  0417 

$0  0404 

$0  0425 

$0  0425 

Spread  to  distributor  

04 

.039 

.0392 

.0383 

.0396 

0375 

0375 

The  average  spread  to  the  milk  dealer  for  these 
fifteen  years  was  about  four  cents  per  quart.  The 
spread  was  slightly  more  than  this,  as  early  in  this 
period  the  producer  was  paid  by  dry  measure  and 
not  by  wet  measure.  During  the  year  1918  the 
spread  was  about  4f  cents  per  quart,  on  the  basis  of 
the  price  to  the  farmer  f.  o.  b.  Philadelphia,  for  4  per 
cent  milk.  During  the  early  months  of  1919  the 
spread  to  the  Philadelphia  dealer,  on  the  same  basis, 
was  4|  cents  per  quart,  an  increase  of  one-half  cent 
per  quart,  or  12|  per  cent  over  the  pre-war  period. 
This  was  on  the  basis  of  4  per  cent  milk.  The  actual 
average  butter  fat  of  the  milk  received  varied  with 
the  season  from  about  3.6  per  cent  to  3.8  per  cent. 
During  1918  and  1919  the  differential  paid  for  butter 
fat  in  this  district  was  40  cents  per  100  pounds. 

181 


THE  PRICE  OF  MILK 


Hence  the  actual  spread  was  more  nearly  4£  cents 
and  4|  cents  per  quart,  respectively,  for  the  two 
periods  given.  This  was  an  increase  over  the  pre- 
war period  of  about  25  per  cent.  The  significance 
of  this  relatively  slight  increase  in  the  distributor's 
spread  as  compared  with  over  a  100  per  cent  increase 
in  price  to  the  farmer,  and  as  compared  with  the 
increase  on  other  commodities  during  the  war  period 
is  discussed  in  the  following  chapter. 

Dr.  Charles  E.  North  has  prepared  the  following 
tables  comparing  the  increases  by  items  in  the 
costs  of  handling  and  distributing  milk  in  New  York 
City,  and  the  increase  in  the  spread  to  the  distributor 
in  that  city  for  1915  and  1918  respectively: 

COST  OF  MILK  HANDLING  AND  DISTRIBUTION,  NEW  YORK  CITY 


Item. 

1915. 

1918. 

Per  Cent 
Increase. 

Freight  
Handling  

$0.0093 
0120 

$0.0120 
0260 

29 

118* 

Distribution 

0238 

0404 

70 

Administration  .     .                 

0032 

0040 

25 

Total  per  quart  

$0.0483 

$0.0824 

PRICE  PER  QUART  OF  MILK,  NEW  YORK  MARKET 


Date. 

Paid 
Producer.1 

Charged 
Consumer. 

Spread  to 
Dealer. 

1915. 

$03  66 

$09  0 

$05  34 

1916 

3  98 

9  33 

5  25 

1917... 

5.82 

11  96 

6.14 

1918  

7.13 

14.50 

7.28 

1  This  is  for  the  150  mile  zone. 


182 


THE  COST  OF  MILK  DISTRIBUTION 

This  is  an  increase  in  the  New  York  City  district 
in  spread  to  the  dealer,  from  1915  to  1918,  of  36.3 
per  cent. 

The  table  on  page  184  gives  an  analysis  for  the 
periods,  companies  and  districts  named,  of  the  cost 
reports  made  to  the  committee  appointed  to  report 
to  Food  Administrator  Hoover  on  the  Production, 
Distribution  and  Food  Value  of  Milk.1  These  re- 
ports were  made  by  the  dealers  themselves,  and  the 
reports  were  audited  by  the  accounting  firm  of 
Haskins  and  Sells,  under  the  supervision  of  the 
author  as  chairman  of  the  committee.  The  "fac- 
tory" expense  in  this  table  is  the  average  of  the 
costs  of  handling,  pasteurizing,  bottling  and  cooling 
milk  for  the  "whole  milk"  trade.  "Selling"  expense 
is  the  expense  incident  to  selling  all  the  milk  pur- 
chased, whether  as  manufactured  products  or  as 
whole  milk.  The  "spread"  in  this  table,  therefore, 
differs  in  the  items  included  from  the  "spread"  for 
a  strictly  whole  milk  dealer.  Special  attention  is 
called  to  the  proportion  manufactured  in  each  of  the 
districts  in  the  table.  Thus  the  "spread"  in  the 
Pittsburgh  district  (D)  is  primarily  for  manufactur- 
ing rather  than  for  retail  distribution. 

Care  must  be  used  in  comparing  the  dealers' 
spread  in  one  city  with  the  spread  to  dealers  in  an- 
other. Many  a  comparison  is  made  that  is  not 
accurate.  In  the  first  place,  care  is  needed  to  make 
certain  that  the  spread  given  for  each  city  includes 
the  same  cost  factors.  Very  often  an  invidious 

1  For  the  names  of  those  on  this  committee  see  footnote  p.  109. 

183 


THE  PRICE  OF  MILK 


OQ 


s 


«g  Id  A 

g  s  s 

S  SS 


I    OO  C«  »>. 

!  S        M-        *? 

'  2      S      S 


i  i  s    fe       g 


IS        oo  cJ        00        S 


S 


000 


§  § 


i    <M    CO 


^      S 


55       ™ 


8 
S3 


o  ia  ; 

£oi 


184 


THE  COST  OF  MILK  DISTRIBUTION 


185 


THE  PRICE  OF  MILK 

comparison  has  been  made  between  the  spread  of 
the  dealers  in  Philadelphia  and  in  New  York  City 
by  comparing  (a)  the  difference  between  the  price 
paid  to  the  farmer  150  miles  out,  for  3  per  cent  milk, 
and  the  price  paid  to  the  consumer  in  New  York 
City  with  (6)  the  price  to  the  farmer  f .  o.  b.  Philadel- 
phia for  4  per  cent  milk  with  the  price  to  the  con- 
sumer in  Philadelphia.  The  first  "  spread  "  includes, 
the  second  excludes,  (1)  the  differences  in  price  to 
the  farmer,  due  to  the  agreed  difference  in  the  price 
of  butter  fat  of  40  cents  per  hundred  weight  (nearly 
one  cent  per  quart),  (2)  the  freight  on  milk  for  150 
miles,  and  (3)  the  country  receiving  station  costs. 
It  is  obvious  that  the  only  fair  comparison  is  between 
the  prices  to  farmers  for  milk  of  the  same  grade  of 
butter  fat  at  the  same  point,  whether  that  point  be 
the  receiving  station  or  the  city  platform,  and  the 
price  to  consumers  for  the  same  grade  of  pasteurized 
bottled  milk  delivered.  When  this  is  done  the 
larger  spread  of  from  one  to  two  cents  per  quart  in 
New  York  City  can  be  accounted  for  in  most  part 
by  differences  between  distributing  conditions  such 
as  the  following:  (1)  In  New  York  City  about  35 
per  cent  of  the  milk  sold  to  dealers  is  delivered  in 
bottles,  retail  to  the  consumer;  in  Philadelphia  over 
90  per  cent  of  the  milk  is  on  the  retail  wagon.  (2)  In 
New  York  City,  business  rents  may  be  higher  than 
in  Philadelphia.  (3)  Distributing  conditions  vary 
between  the  two  cities  in  such  matters  as  adminis- 
tration costs,  sales  methods,  in  capitalization,  and 
particularly  in  the  load  on  the  retail  wagon  and  in 

186 


THE  COST  OF  MILK  DISTRIBUTION 

the  length  of  haul  The  skyscraper  apartment  house 
is  a  factor  in  New  York  City,  while  in  Philadelphia 
it  is  not. 

Similar  differences  exist  as  between  other  cities. 
Thus  Pittsburgh  is  hilly,  while  Cleveland  is  level. 
The  sanitary  standard  of  the  health  department  in 
Washington,  D.  C.,  requires  heavier  costs  to  the 
farmer  and  to  the  milk  dealer  than  in  other  cities. 
Comparisons  between  the  price  to  the  consumer  in 
Baltimore  with  the  consumers'  price  in  Philadelphia 
have  failed  to  mention  that  for  the  same  month 
Baltimore  milk  was  averaging  4.2  per  cent  butter 
fat  as  compared  with  3,8  per  cent  in  Philadelphia. 
With  butter  at  70  cents  per  pound,  this  difference 
would  make  a  cost  difference  of  one-half  cent  per 
quart.  Then  again,  Philadelphia  dealers  at  that 
time  were  buying  largely  by  weight,  and  Baltimore 
dealers  largely  by  measure,  which  gave  to  the  Phila- 
delphia dealer  an  advantage  of  about  one-fourth  of  a 
cent  per  quart.  Labor  and  wage  standards  also  differ 
in  different  cities.  Most  important,  however,  are  the 
quantities  on  and  the  length  of  haul  for  retail  wagons 
and  the  proportion  of  the  milk  that  goes  out  on  retail 
wagons  as  compared  with  the  portion  that  goes 
through  the  grocery  store  as  dipped  or  bottled  milk. 
The  relative  amount  of  surplus  milk  is  also  an  impor- 
tant factor  in  comparing  costs  in  different  cities  or  as 
between  dealers  in  the  same  city.  The  author  has 
found,  also,  a  considerable  difference  in  efficiency  as 
between  milk  firms  in  different  cities,  in  such  matters 
as  return  of  bottles,  care  of  bottles  in  plant,  manage- 

187 


THE  PRICE  OF  MILK 

ment  in  loading  and  unloading  wagons,  competency 
of  superintendents  and  of  retail  salesmen,  difference 
in  methods  of  collecting  bills  and  substantial  differ- 
ences in  the  concept  of  what  constitutes  a  fair 
profit  per  quart.  Philadelphia  and  Milwaukee  are 
among  the  cities  particularly  fortunate  in  the  high 
standard  of  competency  of  their  leading  milk  dis- 
tributors. 

From  what  has  been  pointed  out  thus  far,  it  is  clear 
that  there  is  no  one  cost  of  distribution.  Costs  vary 
materially,  not  only  between  cities,  but  as  between 
dealers  on  the  opposite  side  of  the  same  street.  It 
must  suffice,  therefore,  to  include  here  three  specific 
examples  of  cost  items  for  selected 'dealers  in  three 
different  cities,  all  for  the  periods  stated. 

The  following  are  cost  items  for  a  company  in  a 
large  city  in  the  Mississippi  Valley.  The  cost  items 
are  for  the  month  of  January,  1918.  This  company 
handled  in  that  month  840,000  quarts  of  milk,  of 
which  742,400  quarts  were  sold  as  whole  milk  and 
the  balance  manufactured. 

General  operating  expenses:  Cost 

Supervision,  receiving,  weighing,  can  washing,     per  ^uart- 

pasteurizing,  etc SO. 001483 

Power  and  refrigeration  and  maintenance 004323 

Bottle  washing,  bottling  and  capping 001127 

Bottles  and  caps 001118 

Total  general  operating  expense .008051 

Delivery  expenses: 

Drivers  and  stablemen 015035 

Stable  expenses  and  supplies 007290 

Total  delivery  expenses .022325 

188 


THE  COST  OF  MILK  DISTRIBUTION 

Selling,  administration  and  general  expenses:  per  Quart. 

Salaries  of  officers  and  clerks $0.003533 

Insurance,  taxes  and  interest 001491 

Stationery,  printing,  office  supplies  and  expenses     .001349 

Advertising 001500 

Depreciation  on  buildings  and  equipment 001255 

Sales  allowances.  .  .....  . 002076 


Total  selling,  administration  and  general  expense.  .011204 

Total $0.041580 

The  revenue  and  the  items  in  the  costs  of  deliver- 
ing milk  to  consumers  by  retail  milk  wagons  were 
found  to  be  as  follows  for  the  calendar  year  1917 
for  a  large  company  in  the  East  Central  part  of  the 
United  States.  Manufacturing  costs,  wholesale 
delivery  costs  and  the  costs  of  the  ice  cream  depart- 
ment are  all  taken  out  of  all  these  illustrations. 
About  9,000,000  quarts  of  milk  were  retailed  by  this 
company  during  the  period: 

Cost  per 
Distribution  costs:  Quart  Bottle. 

Receiving  station  expense $0.0057095 

Freight 0041411 

Loss  in  pasteurization 0011812 

Pasteurizing 0050377 

Bottling,  washing  and  platform 0091408 

Delivery 0220158 

Collecting 0040432 

General  office 0043803 

Publicity  and  sales 0012970 

Auditing 0006179 

Purchasing 0001152 

Treasury 0000840 

Administration 0022196 

Expense  of  selling  stock 0010652 


Total  cost  of  distributing  quart  bottle $0.0610485 

189 


THE  PRICE  OF  MILK 

Depreciation  was  charged  in  the  above  to  operat- 
ing costs  as  follows: 

Per  Cent 
per  Annum 

Buildings,  country 10 

Buildings,  city  (brick) 3 

Buildings,  city  (frame) 5 

Equipment,  country , 10 

Equipment,  city 20 

Wagons 10 

Automobiles 20 

Horses — value  written  off  at  death  or  at  sale. 

Harness 10 

Office  equipment 5 

Cases 24 

The  next  is  selected  because  it  gives  the  propor- 
tional part  going  to  wages  for  a  large  eastern  milk 
company  of  high  grade  efficiency  for  the  first  six 
months  of  1919: 

Cost 
Country  expense:  per  Quart. 

Wages $0.0016 

Other  expense .0027 

Total  country  expense $0.0043 

Freight $0.0061 

Milk  cost,  f.o.b.  city .0844 

City  plant  expense: 

Wages $0.0063 

Other  expense 0068 

Delivery  expense: 

Wages 0118 

Other  expense r 0062 

Administrative  expense: 

Wages 0019 

Other  expense 0031 

Total  cost,  country  and  city $0.0361 

190 


THE  COST  OF  MILK  DISTRIBUTION 

To  segregate  out  the  costs  of  distributing  milk 
from  the  costs  of  manufacturing  milk  products  or  of 
making  and  handling  ice  cream  or  of  other  businesses 
conducted  by  the  same  company  requires  answer  to 
many  questions  similar  to  those  that  have  for  the 
while  vexed  rate-making  tribunals.  Thus  electric 
companies  for  a  while  contended  that  their  plants 
existed  to  serve  residence  and  street  lighting  only; 
all  other  services  were  by-products  that  need  carry 
only  their  direct  operating  costs  but  none  of  the 
overheads.  This  made  the  rates  for  residence  and 
street  lighting  relatively  much  higher  than  rates  to 
manufacturing  companies.  Similarly  some  milk 
dealers  have  contended  that  their  whole  business 
plant  exists  to  serve  the  retail  consumer  and  that 
bulk  milk  sold  to  hospitals  and  restaurants,  or  used 
for  ice  cream  or  butter  or  condensed  milk  or  cheese, 
should  bear  none  of  the  overheads  but  only  their 
direct  labor  costs.  The  rule  public  service  com- 
missions soon  enforced  universally  with  electric  or 
with  other  utility  companies  must  be  the  rule  with 
milk  companies:  each  distinct  class  of  commodities 
or  services  must  carry  their  fair  share  of  both  over- 
heads and  operating  costs.  Whether  allocation  in 
the  milk  business  is  to  be  by  values  or  by  quantities 
or  otherwise  is  a  matter  for  judgment  in  a  given 
case.  But  the  general  rule  is  clear — and  very  im- 
portant to  the  consumer. 

Similarly  there  are  other  questions  as  to  valuations, 
apportionments  of  expenses  to  products  and  serv- 
ices, administrative  salaries,  good  will,  competency 

191 


THE  PRICE  OF  MILK 

of  management,  etc.,  that  are  as  pertinent  and  im- 
portant in  ascertaining  a  fair  cost  of  distributing 
milk  as  in  ascertaining  a  fair  rate.  Both  require 
expert  knowledge  and  equitable  considerations. 

The  cost  of  distribution  is  as  important  to  the 
farmer  as  to  the  consumer.  The  price  to  the  con- 
sumer is  the  price  to  the  farmer  plus  the  cost  of 
distribution;  the  price  to  the  farmer  is  the  price 
the  consumer  pays  less  the  cost  of  distribution. 
The  cost  of  distribution  is  therefore  of  public  con- 
cern. Particularly  so  from  the  point  of  view  dis- 
cussed in  Chapter  XI:  can  these  costs  be  lowered  in 
fairness  to  the  dealer  as  well  as  to  the  producer 
and  the  consumer? 


192 


CHAPTER  IX 

Sanitary  Requirements  in  Their  Relation  to  Price 

Milk  is  the  nation's  food — or  its  poison.  To  make 
certain  that  milk  is  not  a  carrier  of  disease  and  to 
prevent  its  adulteration  many  statutory  require- 
ments have  been  adopted.  Moreover,  milk  is  an 
exceedingly  perishable  product.  It  spoils  readily  if 
not  handled  in  a  clean  and  sanitary  manner  and  if 
it  is  not  maintained  at  proper  temperatures.  To  keep 
a  fresh  quality  many  public  regulations  are  enforced. 

Attempts  to  prevent  adulteration  of  milk  are 
very  old.  Mr.  Henry  N.  Woolman1  has  pointed  out 
that— 

In  France  as  early  as  1396  an  ordinance  of  the 
Provost  of  Paris  dated  November  25th  of  that 
year  forbade  the  coloring  of  butter  with  "  saucy 
flowers/'  other  flowers,  herbs  and  drugs.  Old 
butter,  likewise,  was  not  to  be  mixed  with  new, 
but  the  sale  was  to  be  separate  under  penalty  of 
confiscation  and  fine. 

In  1412  the  ancient  laws  of  the  merchant 
butter  sellers  and  fruiterers  of  Paris  confirmed 
the  above  provisions  as  to  butter,  and  further 
forbade  the  sale  of  butter  in  the  same  shop  in  which 
fish  were  sold.  There  was  a  further  provision 
that  no  butter  should  be  sold  by  spicers,  chandlers, 
apothecaries  or  other  persons  carrying  on  aij 
"offensive"  trade. 


*  In  an  address  before  the  Eighth  Annual  Convention  of  the  International 
Milk  Dealers'  Association. 

is  193 


THE  PRICE  OF  MILK 

The  oldest  method  of  adulterating  milk  is  the 
addition  of  water.  If  the  water  used  is  the  carrier 
of  any  water-borne  disease,  such  as  typhoid  or 
dysentery,  such  adulteration  becomes  inimical  to 
health.  If  the  water  used  is  not  the  carriers  of 
disease,  such  adulteration  lowers  the  food  value  of 
the  milk  and  sells  water  to  the  consumer  at  milk 
prices.  For  detecting  such  adulteration  the  "cream 
line"  and  the  "appearance  of  the  milk"  used  by  the 
housewife  are  both  deceptive  tests.  But  by  the 
specific  gravity  and  other  tests  the  addition  of  water 
to  milk  can  be  detected.  Adulteration  by  adding 
skim  milk  or  by  subtracting  the  cream  is  more  diffi- 
cult to  detect,  as  the  ratio  of  fat  solids  in  milk  to  solids 
not  fat  is  not  constant.  The  laws  of  the  majority  of 
the  states,  as  does  the  pure  food  law  of  the  United 
States,  provide  that  no  cream  shall  be  removed  from 
milk  that  is  sold  as  whole  milk.  In  addition  the 
laws  often  provide  minimum  standards  for  the  butter 
fat  in  milk. 

These  legal  standards  as  to  the  minimum  of  butter 
fat  permissible  in  milk  sold  as  whole  milk  and  not  as 
skim  milk  are  of  little  if  any  value.  Some  cows 
produce  milk  with  a  low  butter  fat  content,  often  as 
low  as  2.8  or  2.9  per  cent.  An  examination  of  the 
tables  on  pages  223  to  234  will  show  that  the  legal 
standard  set  for  the  minimum  of  butter  fat  is  3  per 
cent  in  thirteen  statutes  and  3.25  per  cent  in  twenty- 
four  statutes  out  of  the  43  national  and  territorial 
statutes  with  requirements  on  this  point  in  June, 
1919.  Now,  if  the  cow  produces  less  than  this 

194 


I 


SANITARY  REQUIREMENTS 

standard  the  law  provides  either  that  the  milk  can- 
not be  sold  at  all  or  that  it  can  be  sold  only  upon 
proof  that  it  was  the  milk  that  did  naturally  flow 
from  a  given  cow  or  herd.  If  the  statute  attempts 
the  former,  an  injustice  will  be  done  those  producers 
whose  herds  produce  a  milk  of  lower  butter  fat  con- 
tent than  the  statute  permits  to  be  sold.  If  the 
latter  alternative  is  adopted,  the  law  is  of  no  avail, 
as  it  practically  cannot  be  enforced.  In  either  case 
the  milk  distributor  can  safely  distribute  milk  that 
contains  the  minimum  fat  content  provided  by  the 
statute.  Hence  the  milk  delivered  to  the  consumer 
is  often  below  the  standard  of  the  milk  actually 
being  given  by  the  herds  of  the  community  as  a 
whole. 

Shall  Standardization  be  Permitted? 

Inasmuch  as  the  milk  of  different  herds  varies  in 
butter  fat  content,  any  milk  dealer  can  set  to  one 
side  the  milk  from  the  herds  yielding  the  highest 
percentage  of  butter  fat.  The  cream  from  these 
herds  can  be  sold  in  preference  to  the  cream  of  the 
lower  producing  herds.  All  milk  dealers  in  practice 
thus  "select"  the  cans  of  milk  to  be  used  for  sale 
as  whole  milk  or  for  other  purposes.  No  public 
police  surveillance  of  any  kind  can  be  of  sufficient 
detail  to  prevent  this.  Moreover,  no  chemist  can 
prove  that  skim  milk  has  been  put  into  whole  milk, 
if  the  skim  milk  be  added  in  reasonable  quantities. 
And  this  for  the  reason  that  there  is  no  constant 
ratio  between  solids  not  fat  and  fat  solids  not  only 

195 


THE  PRICE  OF  MILK 

as  between  cows  in  the  same  herd  but  as  to  the  milk 
of  the  same  cow  on  successive  days.  Therefore 
nothing  can  prevent  the  "  standardization "  of  milk 
by  some  milk  dealers  through  "  selection "  or  other- 
wise. 

By  "standardization"  is  meant  the  lowering  or 
raising  of  the  butter  fat  content  of  the  milk  by  sub- 
tracting or  adding  cream,  or  lowering  the  butter  fat 
content  and  increasing  the  percentage  of  solids  not 
fat  by  adding  skim  milk.  Many  a  milk  dealer  who 
buys  no  cream  still  has  plenty  of  cream  to  sell.  That 
milk  dealer,  however,  whose  business  would  be  hurt 
by  publicity  of  such  facts,  cannot  afford  to  take  some 
cream  from  the  milk  he  sells  as  whole  milk.  This 
will  usually  include  any  dealer  with  a  considerable 
number  of  patrons  who  read  the  newspapers.  The 
result  is  that  the  irresponsible  dealer  will  "  stand- 
ardize" his  milk  while  the  responsible  dealer  will  not 
take  the  risk. 

The  situation  in  the  City  of  Baltimore  at  the  time 
these  lines  are  being  written  illustrates  at  once  the 
problems  at  issue  and  their  solution.  The  larger 
dealers  of  Baltimore  are  now  buying  milk  on  the 
basis  of  butter  fat  content.  The  farmers  who  sell 
and  the  dealers  who  buy  on  this  basis  have  agreed 
to  accept  the  tests  of  a  certain  laboratory  as  to  what 
is  the  butter  fat  content  of  the  milk  of  each  herd. 
Thus  the  facts  as  to  exactly  what  percentage  of 
butter  fat  these  milk  dealers  buy  are  open  to  all. 
It  is  easy  to  ascertain  the  butter  fat  content  of  the 
milk  on  the  street.  With  such  facts  available  the 

196 


SANITARY  REQUIREMENTS 

responsible  dealer  does  not  standardize.  But  the 
dealer  whom  publicity  will  not  hurt  in  comparison 
with  the  profits  obtained  thereby  is  standardizing 
illicitly.  At  least  one  quart  out  of  five  now  sold  in 
Baltimore  is  thus  standardized  by  reducing  the 
butter  fat  content.  The  responsible  milk  dealer  is 
subjected  to  an  unfair  competition  from  this  trade. 
The  health  department  does  not,  and  cannot  if  it 
would,  prevent  this  illicit  tampering  with  milk  content. 
But  under  the  existing  milk  ordinance  in  Baltimore 
the  health  department  can  state  the  conditions 
under  which  milk  must  be  standardized  if  standard- 
ized at  all.  It  can  require,  for  instance,  that  all 
milk  that  has  been  standardized  shall  be  marked 
"standard"  milk,  and  that  all  milk  so  marked  shall 
contain  not  less  than  3.6  per  cent  or  any  other 
required  percentage  of  butter  fat.  The  milk  on  the 
streets  of  Baltimore  for  the  responsible  dealers  now 
averages  4.2  per  cent  of  butter  fat.  The  resulting 
saving,  if  the  butter  fat  required  were  3.6  per  cent, 
would  reduce  the  price  of  whole  milk,  at  the  prevail- 
ing prices  of  butter,  one-half  cent  a  quart  to  the 
consumer — a  saving  that  may  be  worth  more  to  the 
consumer  than  the  butter  fat  in  the  milk.  Indeed, 
many  a  baby's  milk  is  "modified"  under  a  physi- 
cian's orders  so  as  to  reduce  the  butter  fat  content 
of  cow's  milk  down  to  the  butter  fat  content  in 
mother's  milk.  By  permitting  standardization,  the 
plane  of  competition  would  be  raised  as  between 
dealers  and  the  consumer  would  get  more  cheaply 
just  the  food  content  of  the  milk  really  needed. 

197 


THE  PRICE  OF  MILK 

The  Commission  on  Milk  Standards,  appointed 
by  the  New  York  Milk  Committee,  in  its  report  for 
1917,1  recommends  that  sellers  of  milk  be  permitted 
to  sell  milk  as  whole  milk  if  it  be  unadulterated, 
provided  it  contains  the  minimum  of  butter  fat  and 
solids  not  fat  required  by  law,  or  sell  milk  under  a 
guaranteed  statement  of  composition — that  is  stand- 
ardized. If  the  dealer  elects  the  latter  the  com- 
mission recommends:  (1)  that  the  dealer  be 
required  to  state  conspicuously  on  all  containers  the 
percentage  of  fat  content  to  which  the  milk  is 
standardized;  (2)  that  this  milk  must  contain  a 
minimum  of  8.5  per  cent  in  solids  not  fat;  (3)  that 
the  sale  of  milk  on  this  guaranty  system  should  be 
by  special  permission  obtained  from  some  proper 
local  authority. 

The  author  agrees  with  these  recommendations 
except  in  one  particular — as  a  matter  of  practical 
application  he  believes  the  public  authority  should 
permit  standardization  only  to  a  given  percentage 
of  butter  fat,  preferably  about  3.6  per  cent,  with  a 
minimum  requirement  of  8.5  per  cent  in  solids  not 
fat  and  allow  but  this  one  grade  of  standardized 
milk  to  be  sold.  This  will  put  public  inspection  and 
competition  as  to  price  by  dealers  both  on  a  practical 
basis. 

Uniformity  in  milk  from  day  to  day  is  essential  to 
both  the  consumer  and  the  milk  distributor.  The 
milk  from  one  producer  averages  4.5  per  cent,  an- 
other 4  per  cent,  another  3  per  cent.  Shall  the  milk 

»  Safe  Milk  Supplement  No.  31.     Public  Health  Reports,  May  25,  1917,  p.  7. 

198 


SANITARY  REQUIREMENTS 

of  these  several  producers  be  bottled  just  as  it 
chances  to  come  along?  If  so,  from  the  same  dealer 
a  given  consumer  will  receive  different  grades  of 
milk  on  different  days.  This  is  not  in  the  interest  of 
health  nor  of  sales.  The  average  dealer  therefore 
runs  the  milk  as  it  comes  from  different  producers 
into  large  vats  so  as  to  get  uniformity  as  between 
customers.  Again,  the  process  of  bottling,  unless 
watched,  will  cause  a  difference  of  as  much  as  one- 
half  of  one  per  cent  in  the  fat  content  of  bottled 
milk. 

In  other  words,  the  facts  in  the  industry  now 
require  that  we  pass  from  the  negative  laws  that 
vainly  attempt  to  prevent  the  sale  of  milk  below  a 
stated  minimum  to  laws  requiring  the  dealer  to  sell 
milk  of  not  less  than  a  stated  percentage  of  butter 
fat,  adding  cream  if  necessary  to  bring  all  the  milk 
sold  up  to  this  point.  The  objection  to  this  is  that 
this  may  require  'Hampering  "  with  milk.  But  inas- 
much as  milk  is  tampered  with  anyway,  this  objec- 
tion largely  falls  to  the  ground. 

Adulteration 

One  form  of  adulteration  which  food  laws  aim  to 
prevent  is  the  use  of  coloring  agents  to  give  milk  the 
appearance  of  richness  and  to  avoid  detection  when 
the  milk  has  been  skimmed  or  watered.  For  this 
purpose  caramel,  annatto  and  certain  dyes  are  used, 
"none  of  which  are  particularly  injurious  in  average 
amounts/'1  Chalk  is  probably  never  used  for  this 

1  Ibid.,  p.  7. 

199 


THE  PRICE  OF  MILK 

purpose,  contrary  to  the  common  supposition,  as  it 
is  so  easily  detected.  Such  fraud  must  have  penalties 
prescribed  by  statute. 

Formalin,  borax,  boric  acid,  and  other  antiseptics 
or  germicides  are  used  occasionally  as  milk  preser- 
vatives instead  of  the  true  milk  preservatives: 
proper  cooling,  cleanliness  and  proper  and  adequate 
distributing  facilities.  The  dealer  with  a  large 
trade  will  not  dare  to  use  these  methods  of  preser- 
vatives or  of  adulteration  because  publicity  of  such 
methods  would  ruin  his  business.  But,  as  in  all 
food  businesses,  there  are  the  few  that  use  them. 
It  is  to  prevent  injury  to  health  from  the  use  of 
these  preservatives  that  pure  food  and  milk  laws 
contain  provisions  providing  penalties  for  their  use. 

Sanitary  Standards 

To  prevent  the  spread  of  milk-borne  diseases 
sanitary  standards  are  required  that  are  peculiar  to 
milk.  Milk  is  itself  an  ideal  medium  for  the  growth 
of  bacteria.  To  this  ideal  medium,  through  careless- 
ness in  handling,  may  be  added  bacteria-carrying 
media,  such  as  manure,  hair,  dust,  flies  and  foreign 
material  from  human  sources.  It  is  not  sufficient 
that  this  dirt  be  removed  by  a  clarifier.  The  clarifier 
does  remove  visible  dust  and  certain  inflammatory 
products,  including  many  harmful  germs.  But  it 
does  not  remove  all  the  disease  producjng-germs. 
Some  kinds  of  bacteria  in  milk,  such  as  the  lactic 
acid  bacilli,  are  harmless  or  even  beneficial,  while 
some  are  exceedingly  dangerous. 

200 


SANITARY  REQUIREMENTS 

Among  the  diseases  that  may  be  conveyed  through 
milk  are  tuberculosis,  typhoid  fever,  septic  sore 
throat,  diphtheria,  diarrhea,  enteritis  and  the  foot 
and  mouth  disease.  The  last  named  is  not  serious 
to  the  health  of  man,  but  it  is  to  live  stock. 

"It  is  not  unusual  to  find  that  as  high  as  10  per 
cent  of  market  milk  in  some  cities  contains  live 
tubercle  bacilli.1  Probably  half  of  the  cases  of  so- 
called  surgical  tuberculosis  affecting  children  are 
due"  to  bovine  bacilli.  .  .  .  "and  some  authorities 
estimate  that  at  least  10  per  cent  of  all  tuberculous 
children  owe  their  infection  to  this  form  of  germ/' 
In  butter,  cheese,  cream  and  other  dairy  products 
these  bacilli  will  exist  for  several  months. 

Milk  is  contaminated  with  typhoid  germs  through 
direct  contact  with  some  person  who  has  the  disease. 
The  carrier  of  scarlet  fever  has  never  been  isolated, 
but  it  is  believed  that  the  carrier  of  this  disease  gets 
into  milk  by  careless  coughing  or  sneezing  by  the 
milker  and  possibly  from  inflamed  udders.  Milk  is 
a  vehicle,  though  rarely,  for  diphtheria  through 
direct  contact  with  those  who,  though  apparently 
healthy,  have  the  disease.  The  foot  and  mouth 
disease  is  conveyed  through  milk  or  any  of  its  pro- 
ducts. Filth  as  well  as  bacteria  in  milk  may  cause 
diarrhea  and  enteritis.  Similar  symptoms  may  come 
from  the  abnormal  conditions  of  cows.  The  carriers 
of  septic  sore  throat  get  into  milk  both  from  the 
inflamed  udders  of  diseased  cows  and  from  the 
throats  of  those  who  have  the  disease. 

i  Ibid.,  p.  15. 

201 


THE  PRICE  OF  MILK 

The  means  by  which  each  of  these  diseases  is 
carried  is  given  because  it  is  the  way  these  diseases 
are  spread  that  must  determine  the  method  to  be 
used  in  preventing  their  spread  through  milk. 

One  method  for  preventing  the  spread  of  milk- 
borne  diseases  is  inspection  on  the  dairy  farm;  the 
other  is  pasteurization  and  inspection  of  the  milk  as 
delivered. 

The  present  relative  status  of  these  two  methods 
is  shown  by  the  following  report  of  the  Committee 
on  the  Control  of  Dairy  Products  of  the  Food  and 
Drug  Section  of  the  American  Public  Health  Asso- 
ciation presented  at  the  Chicago  meeting  in  Decem- 
ber, 1919: 

Your  Committee  on  Control  of  Dairy  Products 
has  deemed  it  wise  to  begin  its  survey  of  its  field 
with  the  problems  of  milk  control. 

In  this  field  it  is  confronted  with  the  fact  that 
there  are  two  dissimilar  theories  of  milk  control. 
One,  the  older  theory,  maintains  that  the  control 
should  center  around  an  inspection  of  milk  as  it 
is  delivered  to  the  consumer.  This  theory  was 
dominant  until  about  the  beginning  of  the  present 
century. 

About  1900  the  second  theory  became  prominent. 
According  to  this  theory  milk  could  be  best  con- 
trolled by  a  supervision  of  the  details  surrounding 
its  production,  transportation  and  delivery.  This 
theory  soon  became  immensely  popular,  and  its 
period  of  popularity  was  coincident  with  the 
great  interest  in  dairy  score  cards. 

During  the  past  five  years  there  has  been  a 
distinct  and  increasingly  rapid  swing  of  public 
202 


SANITARY  REQUIREMENTS 

interest  back  to  the  first  theory — namely,  that 
control  can  be  best  based  upon  an  examination  of 
the  milk. 

This  latter  change  has  been  so  rapid  and  so 
recent  that  it  finds  your  committee  somewhat 
divided  between  the  two  conflicting  theories  and 
even  more  divided  as  to  the  best  manner  of 
procedure  in  conducting  a  control  of  milk  under 
the  theory  of  inspection  of  the  milk  itself. 

The  committee  has  tentatively  considered  bas- 
ing the  control  of  milk  upon  the  conception  that 
the  qualities  to  be  desired  in  milk  may  be  included 
under  (1)  food  value,  (2)  healthfulness,  (3)  cleanli- 
ness, and  (4)  keeping  quality. 

While  in  the  main  favorably  disposed  toward 
the  general  plan  as  outlined  above,  it  feels  that 
sufficient  exact  information  is  not  yet  at  hand  to 
settle  some  of  the  differences  of  opinion  which  at 
present  exist  among  its  members,  and  it  accord- 
ingly presents  this  as  a  report  of  progress. 

(Signed)         H.  A.  HARDING, 
R.  S.  BREED, 
H.  W.  REDFIELD. 

Inspection  of  dairies  is  not  a  sure  prevention. 
The  tests,  even  for  bovine  tuberculosis,  do  not  give 
100  per  cent  guarantee  that  the  cow  tested  surely 
does  or  does  not  have  that  disease.  Neither  does 
pasteurization  for  that  matter,  if  improperly  done, 
offer  absolute  protection.  But  pasteurization  does 
offer  a  higher  guarantee  than  does  dairy  inspection. 

Milk  is  pasteurized  by  heating  it  to  a  temperature 
of  140°  to  155°  F.,  which  is  a  temperature  sufficient 
to  kill  the  disease-bearing  germs.  The  Commission 

203 


THE  PRICE  OF  MILK 

on  Milk  Standards  in  the  report  referred  to  above 
recommends: 

That  the  pasteurization  of  milk  should  be 
between  the  limits  of  140°  F.  and  155°  F.  At 
140°  F.  the  minimum  exposure  should  be  20  min- 
utes. For  every  degree  above  140°  F.  the  time 
may  be  reduced  by  one  minute.  In  no  case  should 
the  exposure  be  for  less  than  five  minutes. 

In  order  to  allow  a  margin  of  safety  under  com- 
mercial conditions,  the  commission  recommends  that 
the  minimum  temperature  during  the  period  of 
holding  should  be  made  145°  F.,  and  the  holding 
time  30  minutes. 

The  commission  thinks  that  pasteurization  is 
necessary  for  all  milk,  excepting  Grade  A1  raw  milk. 
The  majority  of  the  commissioners  voted  in  favor  of 
the  pasteurization  of  all  milk,  including  Grade  A 
raw,  but  since  the  action  was  not  unanimous  the 
commission  recommended  that  the  pasteurization  of 
Grade  A  raw  milk  be  optional.  By  the  "  flash " 
method  the  milk  is  heated  to  a  temperature  of  from 
160°  to  165°  F.  in  from  30  to  60  seconds,  and  then 
cooled  immediately. 

Many  objections  have  been  urged  to  pasteurization. 
One  is  that  it  gives  to  milk  a  "  cooked  "  taste.  But 
pasteurization  does  not  give  this  taste  unless  the 
milk  is  brought  to  a  temperature  of  155°  F.  or  above, 
and  this  is  not  necessary.  Another  is  that  the  use 
of  pasteurized  milk  may  cause  scurvy. 


1  For  definition  see  footnote  p.  222. 

204 


SANITARY  REQUIREMENTS 

Professor  McCollum's  conclusions   as  to  boiled 
milk  and  as  to  pasteurization  are:1 

Boiled  milk  has  been  extensively  fed  to  infants 
in  various  parts  of  the  world  and  in  the  experience 
of  some  observers  does  not  induce  scurvy.  The 
experience  of  Hess  further  supports  the  view  that 
boiled  milk  is  less  liable  to  induce  scurvy  than  is 
milk  which  has  been  pasteurized  at  165°  F.  or  at 
a  higher  temperature.  Milk  which  has  been 
pasteurized  at  165°  F.  is  more  liable  to  induce 
scurvy  than  either  boiled  milk  or  milk  which  has 
been  pasteurized  at  lower  temperatures,  as  140° 
to  145°  F.  for  thirty  minutes.  The  most  satis- 
factory explanation  for  these  results  seems  to  be 
found  in  the  bacteriological  condition  of  the  milks 
treated  in  the  various  ways  described.  Heating 
milk  at  165°  F.  kills  nearly  all  the  lactic  acid 
forming  bacteria  which  normally  cause  the  souring 
of  milk.  Heating  for  thirty  minutes  at  140°  to 
145°  F.  leaves  some  organisms  capable  of  develop- 
ment, and  milk  so  pasteurized  will  sour.  In  the 
absence  of  the  acid  formers  there  develop  during 
the  interval  between  heating  and  consumption 
the  spore-forming  organisms  which  are  not  killed 
by  pasteurization.  These  will,  in  time,  cause  the 
putrefactive  decomposition  of  the  milk.  Any  heat 
treatment  which  kills  all  the  acid  formers  leaves 
the  milk  in  a  suitable  condition  for  the  develop- 
ment of  the  pernicious  forms,  and  old  milk  so 
treated  may  be  a  menace  to  the  health  of  infants 
and  unfit  for  consumption  by  adults.  Boiling  tends 
to  destroy  all  the  organisms  in  milk  and  will  do  so 
if  sufficiently  prolonged.  Such  milk  may  be  more 
suitable  for  food  than  that  which  has  been  so 


1  E.  V.  McCollum,  "The  Newer  Knowledge  of  Nutrition,"  1919,  p.  101. 

205 


THE  PRICE  OF  MILK 

treated  as  to  prevent  souring  and  yet  be  in  a 
condition  to  permit  the  growth  of  putrefactive 
forms  of  bacteria.  These  results  strongly  support 
the  view  that  there  is  a  bacteriological  factor 
involved  in  the  causation  of  scurvy,  and  emphasizes 
the  importance  of  securing  clean  milk,  and  of 
having  it  so  handled  as  to  insure  its  delivery  in  a 
good  bacteriological  condition.  Milk  should  not 
be  kept  in  the  home  without  efficient  refrigeration, 
and  should  be  consumed  before  it  becomes  stale. 

Pasteurization  seems,  in  itself,  to  have  little 
influence  in  lowering  the  food  value  of  milk.  The 
staleness  is  the  great  element  of  danger.  Pasteur- 
ization is  desirable  as  a  safeguard  against  such 
diseases  as  typhoid  fever,  tuberculosis,  scarlet 
fever  and  such  organisms  as  cause  epidemics  of 
sore  throat.  It  does  not  render  milk  permanently 
harmless.  .  .  .  Stale  milk  is  dangerous,  especially 
for  use  in  infant  feeding.  In  other  words,  the 
danger  of  pasteurization  is  more  that  people  will 
keep  the  milk  too  long  and  use  it  because  it  does 
not  "sour",  inasmuch  as  the  germs  causing  acidity 
were  killed  in  pasteurization. 

Says  the  Commission  on  Milk  Standards  in  its 
report  in  1917: 

Scurvy  and  pasteurization. — The  commission  has 
assumed  that  the  low  temperature  of  145°  F.  for 
30  minutes  as  recommended  by  this  commission 
for  pasteurization  destroys  none  of  the  food  con- 
stituents of  milk.  Inquiry  conducted  by  the  New 
York  City  Department  of  Health  into  the  records 
of  the  infant-milk  depots,  where  sometimes  over 
25,000  infants  are  fed  daily  on  pasteurized  milk, 
appears  to  bear  out  this  assumption.  In  view  of  the 
fact,  however,  that  recent  hospital  experimental 
200 


SANITARY  REQUIREMENTS 

studies  suggest  that  an  exclusive  diet  of  pasteurized 
milk  may  give  rise  to  a  subacute  scurvy  or  similar 
nutritional  disease  in  infants,  which  was  entirely 
prevented,  and  even  cured,  by  the  feeding  of 
orange  juice,  or  other  antiscorbutic  food,  the  com- 
mission recommends  that  orange  juice  be  added  to 
the  diet  of  infants  that  are  fed  on  pasteurized  milk. 
The  commission  wishes  also  to  reaffirm  its  advo- 
cacy of  the  adoption  of  pasteurization  by  munici- 
palities as  a  public-health  measure, 

Pasteurization  is  necessary  to  insure  the  protection 
of  the  consumers  of  butter  from  typhoid  and  tuber- 
culosis. Mohler,  Washburn  and  Rogers1  state: 
"The  work  recorded  in  our  investigations,  as  well  as 
that  by  contemporaneous  writers,  proves  that  con- 
stant storage  in  icy  temperature  does  not  destroy 
the  virulence  of  butter  which  contains  dangerous 
tubercle  bacilli/' 

If  milk  is  pasteurized  at  a  heat  above  150°  F.,  about 
10  per  cent  less  cream  will  rise  to  the  surface  than 
will  rise  in  raw  milk  or  in  perfectly  pasteurized  milk. 
The  higher  "cream  line"  on  milk  thus  improperly 
pasteurized  has  led  some  to  believe  that  pasteurized 
milk  has  less  cream  than  raw  milk.  This,  of  course, 
is  not  the  case,  as  the  heat  essential  to  pasteurization 
in  no  way  destroys  fat. 

Pasteurization  of  milk  brought  home  from  city 
plants  is  also  necessary  for  the  farmer.  Even  the 
skim  milk  from  the  common  supply  tank  of  the 

1  Mohler,  John  R.,  Washburn,  Henry  J.,  and  Roger,  Lore  A.,  "The  Viability 
of  Tubercle  Bacillie  in  Butter,"  United  States  Department  of  Agriculture  B.  A.  I., 
Annual  Report,  1909,  pp.  179-191. 

207 


THE  PRICE  OF  MILK 

butter  factory  taken  home  for  feeding  to  animals  on 
the  farm  should  be  pasteurized  so  as  to  make  certain 
that  it  is  not  a  carrier  of  tuberculosis  or  the  foot  and 
mouth  disease. 

Opposition  to  pasteurization  is  often  based  on  the 
theory  that  the  cost  of  pasteurizing  equipment  is 
such  as  to  drive  out  the  small  dealer  and  favor  the 
large  dealer  and  thus  make  for  a  monoply  of  milk 
distribution  within  the  city.  For  reasons  pointed 
out  elsewhere  there  is  a  tendency  for  concentration 
of  milk  routes  because  of  the  economies  in  the  larger 
retail  loads.  Other  things  being  equal,  the  larger  the 
volume  of  milk  handled  in  the  plant  or  on  the  retail 
wagon  the  lower  the  cost  per  quart  in  handling  it. 
This  is  as  true  of  pasteurization  as  of  every  other 
step  in  receiving,  transporting  and  distributing  milk. 
In  other  words,  there  are  economies  in  handling 
larger  quantities  of  milk.  To  this  rule  pasteurization 
is  no  exception.  Just  because  the  tendency  for 
business  men  to  get  the  savings  in  costs  due  to 
handling  larger  quantities  of  milk  and  the  public 
tendency  to  make  pasteurization  compulsory  de- 
veloped at  about  the  same  time,  it  has  been  easy 
to  conclude  that  the  tendency  toward  larger  milk 
bflsinesses  was  due  solely  to  the  requirement  for 
pasteurization.  Such  is  not  the  case. 

What  compulsory  pasteurization  does  of  ten  do  is  to 
prevent  the  nearby  farmer  from  delivering  his  own 
raw  milk  direct  to  the  consumer.  In  small  towns 
in  dairy  regions  this  trade  may  be  a  significant  price 
regulator.  In  towns  or  cities  of  any  size,  however, 

208 


SANITARY  REQUIREMENTS 

this  type  of  trade  is  not  a  determining  price  factor. 
In  any  case  the  fewer  the  distributors  the  more  cer- 
tain the  proper  inspection  of  the  quality  of  the  milk 
they  deliver,  and  the  fewer  the  distributors  the  lower 
their  unit  costs  and  hence  less  competition  from 
outlying  farmers. 

There  are  two  reasons  for  pasteurization.  One  is 
to  protect  the  health  of  those  who  consume  it.  Is 
this  protection  worth  the  cost?  The  other  is  the 
commercial  advantage  of  handling  milk  from  more 
distant  sources.  Is  this  commercial  advantage 
worth  the  cost?  This  commercial  advantage  may 
be  in  the  interests  of  the  small  dealer  as  well  as  the 
large,  depending  upon  the  source  of  the  supply  and 
the  facilities  for  transportation  of  each.  It  is  just 
as  possible  for  the  large  dealer  to  have  most  of  the 
nearby  dairies  with  direct  transportation  facilities 
as  for  the  small  dealer  to  have  them.  With  pasteur- 
ization the  available  market  for  the  purchase  of  milk 
is  widened. 

What  does  it  cost  to  pasteurize  milk?  Mr.  John 
T.  Bowen,1  technologist  for  the  Dairy  Division  of 
the  United  States  Department  of  Agriculture,  in 
1917,  made  tests  of  the  cost  of  pasteurizing  the  daily 
supply  of  milk  in  five  city  plants.  He  assumed  a 
depreciation,  including  repairs,  of  25  per  cent  on  the 
pasteurizing  equipment,  such  as  pasteurizers,  vats 
and  coolers,  that  had  to  be  daily  taken  apart  and 
cleaned;  and  10  per  cent  for  depreciation  and  repairs 


1  "The  Cost  of  Pasteurizing  Milk  and  Cream."     Bulletin  No.  85,  United  States 
Department  of  Agriculture. 

u  209 


THE  PRICE  OF  MILK 


on  other  machinery  such  as  engines,  boilers  and 
shafting.  The  cost  assumed  for  coal  was  $4  per  ton. 
Interest  on  investment  was  estimated  at  6  per  cent 
per  annum.  The  hourly  wage  for  labor  is  not 
stated.  The  number  of  pounds  pasteurized  at  each 
of  the  five  plants,  the  number  of  hours  taken  for 
pasteurizing  this  amount,  and  the  cost  per  gallon 
was: 


Plant  Number. 

1 

2 

3 

4 

5 

Time  ol  operation  (hours)  .  .  .... 

4.366 
40,577 
$0.00229 

3.216 
20,236 
$0.00262 

2.0 

7,628 
$0.00436 

4.0 

29,799 
$0.00251 

3.6 

22,055 
$0.00387 

Number  of  pounds  of  milk  pasteurized  
Cost  of  pasteurizing,  per  gallon  

The  average  cost  for  the  five  plants  was  .00313 
cent  per  gallon,  or  .00078  cent  per  quart.  The  three 
companies  whose  costs  were  below  this  average 
(.001229,  .00262  and  .00251  cent  respectively)  were 
those  that  pasteurized  the  larger  quantities.  Yet  the 
cost  to  company  "3"  was  but  a  small  fraction  of  a 
mill  per  gallon  above  that  of  company  "5"  which 
pasteurized  three  times  the  quantity  of  company  "  3. " 
The  same  author  found  the  cost  of  pasteurizing 
cream  to  be  .00634  cent  per  gallon,  or  .0756  cent  per 
100  pounds.  This  would  amount  to  about  two- 
tenths  of  one  cent  for  each  pound  of  fat,  calculating 
35  pounds  of  milk  fat  in  100  pounds  of  cream. 

Other  things  being  equal,  the  larger  volume  the 
lower  the  cost  per  unit  in  pasteurizing  milk  as  in 
other  costs  of  receiving,  handling  and  distributing 

210 


SANITARY  REQUIREMENTS 

milk.     But  the  differences  in  the  cost  of  pasteurizing 
alone  is  not  sufficient  of  itself  to  cause  concentration. 

Were  pasteurization  not  required  to  protect  the 
public  health,  many  firms  would  still  pasteurize  for 
commercial  reasons.  In  the  same  sense  hygienic  and 
sanitary  conditions  in  the  dairy  pay  the  farmer  in 
the  longer  lives  of  the  herds  and  in  the  larger  volume 
of  milk  that  will  be  produced  with  the  same  feed 
from  cows  kept  under  hygienic  conditions.  A  small- 
mouth  milk  can  is  as  advisable  for  milk  for  the  pigs 
as  for  city  consumers. 

There  are  other  costs  also  that  are  really  incident 
to  proper  sanitary  requirements.  Among  these  are 
refrigeration,  bottling,  and  bottle  and  can  washing. 
Yet  these  costs,  too,  are  incident  to  the  necessity  of 
"package"  delivery.  A  neat,  clean,  sterile  container 
is  as  advisable  commercially  for  milk  as  for  the 
articles  delivered  from  the  city  store.  The  washing 
and  sterilizing  of  milk  cans  has  a  commercial  value 
as  well  as  a  value  in  protecting  health. 

The  up-to-date  milk  plant  will,  as  a  sanitary  pre- 
caution, have  all  the  air  thoroughly  washed  that 
comes  into  the  rooms  where  milk  is  handled,  in 
order  to  keep  out  the  street  dust.  This,  too,  is  an 
expense,  as  is  the  assurance  of  absolute  purity  of 
the  supply  of  the  water  that  comes  in  contact  with 
milk  containers. 

While  these  services  to  protect  milk  cost  money, 
yet  the  costs  of  meeting  proper  sanitary  require- 
ments by  the  milk  dealer  and  the  milk  producer  are 
not  prohibitive  and  do  not  add  unduly  to  the  cost  of 

211 


THE  PRICE  OF  MILK 

milk.  In  some  places  a  premium  is  paid  for  milk 
produced  under  hygienic  conditions.  Thus  one 
dealer  in  Washington,  D.  C.,  pays  a  premium  of  one 
cent  a  gallon  for  tuberculin  tested  milk  and  a  premium 
of  one-half  cent,  one  cent  and  one  and  one-half  cents 
per  gallon  for  milk  produced  under  conditions  where 
the  barn  score  is  75  to  80,  80  to  85,  and  85  or  more, 
respectively.  This  brings  a  better  tasting  product 
and  a  product  easier  to  handle  commercially.  In 
other  places  the  premium  for  milk  produced  with 
good  barn  scores  amounts  to  about  ten  cents  per 
hundred  pounds,  or  less  than  three  mills  per  quart. 
The  total  cost  for  all  purposes  for  protecting  herds 
and  live  stock,  for  hygienic  conditions  on  the  farm, 
for  refrigeration  in  transit,  for  pasteurization  and  for 
refrigeration  in  delivery  total  around  one  cent  per 
quart,  a  portion  of  which  is  for  business  advantage 
and  a  portion  incident  to  the  proper  protection  of 
the  public  health. 

Shall  Licenses  be  Required  from  Milk  Producers? 

The  objection  to  reliance  solely  upon  inspection  of 
dairy  herds  and  barns  to  protect  the  wholesomeness 
of  milk  is  that  few  cities  have  the  inspectors  neces- 
sary, and  those  that  have  an  adequate  number  of 
inspectors,  do  not  have  inspectors  with  the  proper 
qualifications,  too  often  because  the  salary  paid  is 
too  low  to  attract  the  technical  talent  necessary. 
But  quite  outside  of  this  there  are  so  many  ways  of 
circumventing  inspection  that  the  method  is  unre- 
liable at  its  best  and  adds  heavily  to  the  cost  of  the 

212 


SANITARY  REQUIREMENTS 

consumer.  Washington,  D.  C.,  offers  an  illustration 
of  this.  It  was  the  duty  of  the  author  during  the 
early  winter  of  1918  to  advise  the  Food  Adminis- 
trator of  the  District  of  Columbia  on  matters  per- 
taining to  milk  prices  in  the  District.  The  author 
found  in  his  investigations  that  the  standards  set 
for  the  District  requiring  inspection  and  permits  for 
all  dairies  sending  milk  into  the  District  did  add  to 
the  cost  of  the  milk  to  the  consumer  in  ways  addi- 
tional to  the  cost  of  the  service.  For  instance,  the 
best  dealers  paid  a  premium  to  farmers  who  had 
satisfactory  barn  scores.  This  cost  money,  both  to 
administer  and  in  the  production  of  the  milk.  Other 
dealers  did  not  go  to  these  costs — but  they  kept  the 
same  price  to  the  consumer  as  those  that  did.  In  a 
statement  appearing  in  the  newspapers  of  the  Dis- 
trict on  March  31, 1919,  Health  Officer  Fowler,  said: 

The  health  department  is  in  full  sympathy  with 
the  licensed  fanner  who  has  to  compete  with  his 
unlicensed  neighbor  and  is  doing  all  it  can  to 
protect  them,  but  feels  that  its  position  in  this 
matter  should  be  clearly  understood  by  all  con- 
cerned. 

It  is  admitted  that  milk  from  unlicensed  farms 
has  been  and  is  still  being  brought  into  the  District 
of  Columbia,  but  it  is  not  being  brought  into  the 
District  with  the  permission  of  the  District 
authorities.  ;  The  health  department  has  resorted 
to  every  means  at  its  command  to  prevent  this 
unlawful  practice  and  has  consistently  brought 
proceedings  against  all  dealers  who  have  been 
detected  in  engaging  in  such  practice. 

It  is  much  regretted,  however,  that  the  depart- 
213 


THE  PRICE  OF  MILK 

ment  has  met  with  little  success  in  getting  these 
cases  before  the  court  for  final  disposition.  As  an 
evidence  of  the  activities  of  the  department  in  the 
enforcement  of  the  milk  law,  forty-five  cases, 
involving  twelve  separate  dairymen  in  this  city, 
most  of  them  being  large  distributors,  are  now 
awaiting  trial  before  the  court.  On  or  about  Jan- 
uary 30th  a  local  dealer  was  tried  before  a  jury  in 
police  court  for  bringing  milk  from  an  unlicensed 
farm  into  the  District  of  Columbia,  and  was 
adjudged  guilty.  His  attorney,  however,  by 
resorting  to  certain  legal  procedures,  has  thus  far 
been  able  to  prevent  the  imposition  of  the  deserved 
penalty. 

The  statement  that  "dealers  who  procure  their 
milk  supply  from  properly  licensed  farms  are 
penalized,  since  other  dealers  who  compete  with 
them  are  permitted  to  bring  milk  into  Washington 
from  uninspected  sources"  is  equally  a  misstate- 
ment  of  facts.  Among  the  forty-five  cases  now 
awaiting  action  by  the  court,  some  of  the  largest 
dealers  in  Washington  are  involved.  These 
dealers  not  only  obtained  milk  from  licensed  farms, 
but  have  also  obtained  it  from  unlicensed  farms  as 
well,  mixing  the  products  of  the  two  farms  at 
their  respective  dairies  in  this  city.  The  one 
thousand  gallons  of  unlicensed  milk  which  has 
been  referred  to  in  the  public  press  recently  was 
brought  into  Washington  by  a  dealer  who  obtains 
his  supply  from  both  licensed  and  unlicensed 
sources. 

The  licensed  dairy  farmer  or  producer  is  also 
not  entirely  blameless  in  the  matter  of  milk  from 
unlicensed  farms  being  brought  into  the  District 
of  Columbia,  as  the  health  department  is  in  pos- 
session of  information  tending  to  show  that  some 
214 


SANITARY  REQUIREMENTS 

producers  operating  under  a  license  issued  by  the 
health  department  allow  their  unlicensed  neighbors 
to  use  their  cans  (the  licensed  shipper's)  and  to 
ship  the  unlicensed  product  as  a  part  of  the  milk 
supply  from  the  licensed  farm. 

The  requirement  of  a  license  from  producers  as  a 
prerequisite  to  selling  milk  in  some  instances  may  be 
and  has  been  used  to  limit  supply  for  the  purpose  of 
securing  more  or  less  of  a  monoply  price.  The 
following  is  taken  from  a  Washington,  D.  C.,  paper 
the  day  after  the  statement  by  Dr.  Fowler  appeared 
as  quoted  above. 

(2)  MILK  DEALERS  ARE  PROSECUTED 

Producers9  Association  Plan  for  Enforcement  of 

Law  Brings  Results 

Prosecutions  were  initiated  yesterday  by  the 
District  health  department  against  two  prominent 
milk  dealers  on  charges  of  having  violated  the  law 
forbidding  the  bringing  into  the  District  of  milk 
from  unlicensed  dairies.  The  evidence  was  col- 
lected and  the  warrants  made  out  and  signed 
within  the  single  day,  which  is  said  to  be  record 
time. 

Three  prosecutions  have  been  instituted  since 
Saturday.  This  action  follows  a  resolution  passed 
last  week  by  the  executive  committee  of  the  Vir- 
ginia and  Maryland  Milk  Producers'  Association, 
appealing  to  the  District  authorities  to  enforce  the 
law,  as  it  caused  them  heavy  losses  to  be  obliged 
to  compete  with  unlicensed  producers. 

Professor  H.  A.  Harding  of  the  University  of 
Illinois,  chairman  of  the  Committee  of  the  American 

215 


THE  PRICE  OF  MILK 

Public  Health  Association,  quoted  above,  sums  up 
the  present  tendency  as  to  the  best  methods  of  sani- 
tary control  of  milk  as  follows: 

"It  is  apparent  to  any  one  familiar  with  the 
milk  business  that  the  conditions  surrounding  the 
production  of  milk  may  change  twice  a  day,  and 
those  surrounding  its  transportation  and  distribu- 
tion at  least  once  a  day.  Under  the  most  generous 
appropriations  available  to  any  of  the  larger  cities 
it  has  not  been  possible  to  inspect  the  conditions 
surrounding  production  more  than  once  in  three 
months  and  more  frequently  this  inspection  has 
not  averaged  more  than  once  a  year.  Under  such 
circumstances  any  genuine  application  of  the 
theory  of  official  supervision  of  the  details  of  pro- 
duction is  manifestly  impossible. 

Sanitarians  as  a  class  are  not  more  deficient  in 
common  sense  than  other  people  and  they  gradually 
became  conscious  of  the  situation.  New  York 
City,  which  was  early  the  leader  in  farm  inspection, 
was  one  of  the  first  to  frankly  abandon  it,  at  least 
so  far  as  it  applied  to  ordinary  market  milk.  In 
discussing  the  matter  with  the  Health  Commissioner 
of  one  of  our  next  largest  municipalities,  he  said 
frankly  that  he  considered  farm  inspection  as 
camouflage.  The  chief  dairy  inspector  from  one 
of  the  states  where  the  state  dairy  inspection  is  at 
its  highest  efficiency,  said  recently  that,  while 
he  formerly  considered  them  as  very  important, 
it  had  been  a  long  time  since  he  had  paid  much 
attention  to  dairy  farm  score  cards. 

Much  similar  evidence  might  be  presented  to 

show  that  the  theory  of  official  supervision  of  the 

details  of  the  milk  business  has  had  its  day,  and 

now  the  tide  is  setting  strongly  toward  the  theory 

216 


SANITARY  REQUIREMENTS 

that  official  control  of  milk  supplies  should  rest 
upon  an  examination  of  the  milk  as  it  is  delivered 
to  the  consumer  as  far  as  it  is  possible  to  adequately 
protect  the  consumer  by  such  an  examination.  It 
seems  an  easy  and  safe  prediction  that  during  the 
next  ten  years  the  controversies  in  milk  control 
will  range  around  the  question  as  to  what  are  the 
examinations  which  will  best  accomplish  this  object. 
At  the  same  time  the  milk  dealers  should  appreci- 
ate that  as  the  health  officials  relax  their  efforts  to 
directly  stimulate  the  producer,  the  responsibility 
for  so  doing  will  fall  entirely  upon  the  distributors. 
This  is  a  responsibility  which  they  must  accept 
and  should  discharge  creditably, 

Wholesomeness  of  milk  is  even  more  important 
than  its  food  value.  The  word  wholesome  means 
not  merely  pure  milk,  but  milk  that  invites  drinking 
because  it  tastes  so  good.  The  first  prerequisite  to 
wholesome  milk  is  that  it  be  promptly  cooled.  This 
prompt  cooling  widens  the  farmer's  market  by  mak- 
ing the  milk  taste  better  and  lowers  costs  by  reducing 
waste.  The  prompt  cooling  and  proper  handling  of 
milk  on  the  farm  makes  money  for  all  farmers  and 
saves  money  and  ill  health  to  all  consumers. 

The  less  milk  is  handled  by  human  beings  and  the 
more  it  is  handled  by  machines  that  can  be  sterilized, 
the  fewer  the  possibilities  of  contamination,  the 
fewer  the  centers  of  contagion,  the  purer  the  milk 
supply.  Hence  milk  should  go  direct  from  fanner  to 
consumer  through  sterilized  equipment,  free  from  the 
touch  of  human  hands  and  from  the  dust  of  the 
cities;  for  the  city  dust  of  today  is  made  up  of  the 

217 


THE  PRICE  OF  MILK 

spittings  of  yesterday.  To  put  this  point  another 
way,  milk  should  be  taken  through  receiving  stations 
subject  to  inspection,  transported  under  refrigerated 
conditions,  and  delivered  (refrigerated,  pasteurized, 
bottled)  to  the  consumer's  doorstep;  never  out  of 
controlled  conditions  and  not  subject  to  work  done 
by  hand.  Happily,  this  policy  means  not  only  pure 
milk  and  wholesome  milk,  but  milk  at  a  lower  cost 
per  unit,  for  reasons  pointed  out  elsewhere. 

Inspection  of  dairy  herds  and  barns  helps  the 
farmer  protect  his  own  herds  and  his  own  family 
and  improves  the  quality  of  the  product  he  has  to 
sell.  By  improving  quality  he  expands  his  market. 

But  inspection  of  dairies  can  never  be  so  complete 
as  really  to  safeguard  the  supply  of  milk. 

The  qualities  of  milk  needed  when  delivered  to 
the  consumer  are:  food  value,  healthfulness,  cleanli- 
ness, keeping  quality.  The  first  is  assured  by  the 
test  of  fat  content  and  of  milk  solids  other  than  fat; 
the  second  by  prompt  cooling  on  the  farm,  and  by 
pasteurization;  the  third  by  sediment  tests;  the 
last  by  prompt  cooling  with  proper  refrigeration 
from  the  farm  to  the  consumer. 

The  question  is  not  as  to  whether  pasteurization 
can  dispense  with  hygienic  conditions  surrounding 
the  production,  transportation  and  distribution  of 
milk,  but  whether  sediment,  acid,  bacterial  and  simi- 
lar tests  of  milk  as  delivered,  just  because  they  can  be 
used  effectively,  get  a  more  wholesome  milk  than 
does  inspection  on  the  farm  just  because  dairy 
inspection  cannot  be  done  effectively. 

218 


SANITARY  REQUIREMENTS 

The  best  public  policy  is  to  use  each  of  these 
methods  for  the  ends  which  each  is  peculiarly 
adopted  to  achieve.  Daily  tests  of  milk  as  delivered 
to  the  consumer  will  point  to  the  places  in  plants 
or  in  dairies  or  in  transit  where  the  milk  may  be 
contaminated  or  improperly  kept.  Inspection  of 
plants  and  of  dairies  can  then  be  made  to  find  and 
check  the  causes  for  unwholesome  milk.  The 
dairy  inspector  can  help  the  dairyman  in  a  business 
way  by  assisting  him  to  improve  the  hygienic 
conditions  surrounding  his  herds  and  the  sanitary 
conditions  under  which  his  milk  is  cooled,  kept  and 
delivered.  The  inspector  can  help  the  dealer  in 
his  plant.  In  these  ways  inspection  costs  can  be 
kept  as  low  as  consistent  with  a  pure  milk  supply 
without  undue  interference  with  the  price  for  milk. 
Under  this  plan  a  license  is  not  required  from  the 
producer  before  he  is  allowed  to  sell  milk.  But  the 
producer  or  distributor  that  knowingly  violates 
health  standards  is  denied  a  market. 

To  prevent  duplication  the  city  and  state  inspectors 
must  cooperate.  When  several  cities  get  their  milk 
supply  from  the  same  territory  it  is  better  for  the 
inspectors  to  be  under  state  employ  in  order  to  get 
uniformity  and  to  avoid  duplication. 

Standards  for  Milk  Inspectors 

A  survey  made  before  the  war  by  Dr.  Ernest 
Kelly  of  the  United  States  Department  of  Agricul- 
ture as  to  the  salaries  paid  to  inspectors  in  31  of  our 
states  and  102  of  our  cities  showed  that  the  highest 

219 


THE  PRICE  OF  MILK 

salary  paid  for  milk  inspectors  was  $1800  by  the 
states  and  $2100  by  the  cities,  the  lowest  salary 
being  $1000  and  $720  by  states  and  cities  respec- 
tively. The  average  salaries  for  these  inspectors 
was  $1352.16  for  the  states  and  $1208  for  the  cities. 
But  half  of  these  employees  were  under  civil  service. 
Both  the  tenure  of  office  and  the  general  lack  of 
prescribed  qualifications  indicated  that  those  who 
did  milk  inspecting  were,  as  a  rule,  not  expert. 
As  a  result  of  this  survey  "The  Committee  on 
Methods  of  Appointment  of  Dairy  and  Milk  Inspec- 
tors and  their  Compensation "  reported  to  the 
International  Association  of  Dairy  and  Milk  Inspec- 
tors1 the  following  recommendations: 

1.  Cities  and  States  should  strive  to  employ 
only  men  who  can  devote  their  entire  time  to  dairy 
and  milk  inspection. 

2.  No  dairy  or  milk  inspectors  should  be  em- 
ployed who  derive  any  private  income  from  the 
persons  with  whom  they  deal  in  their  inspection 
work. 

3.  Salaries  should  be  paid  to  dairy  and  milk 
inspectors  commensurate  with  the  training  and 
experience  necessary  for  properly  performing  the 
work. 

4.  Dairy  and  milk  inspectors  should  be  protected 
by  civil  service  laws  against  removal  except  for 
cause. 

5.  Civil  service  requirements  should  recognize 
the  fact  that  special  education  and  training  are 
not  only  desirable,  but  necessary  in  a  candidate  for 
appointment. 


»  At  the  Fifth  Annual  Convention  held  in  Springfield,  Maw. 

220 


SANITARY  REQUIREMENTS 

6.  Dairy  and  milk  inspectors  should  be  agricul- 
tural college  graduates  or  should  have  at  least 
attended  such  an  institution,  or  institutions  of 
similar  rank,  long  enough  to  have  acquired  a 
working  knowledge  of  dairy  sanitation,  bacteriology 
and  chemistry. 

7.  It  is  very  desirable  that  inspectors  should  have 
had  practical  experience  in  at  least  one  branch  of 
the  dairy  business,  so  that  they  are  familiar  with 
trade  practices  and  the  problems  with  which  they 
will  be  constantly  confronted. 

If  it  costs  money — as  it  does — to  make  and  keep 
milk  a  wholesome  food,  the  obvious  plan  is  not  to 
prevent  wholesome  milk  because  of  the  costs  but  to 
adopt  those  public  policies  that  will  lower  not  only 
these  costs  but  all  costs  of  distribution,  and  to 
make  certain  that  those  who  need  milk  get  it  through 
the  proper  channels.  The  Food  Administration  of 
Pennsylvania,  during  the  war  period,  appointed  a 
committee  of  one  representative  from  each  of  the 
charitable  organizations  in  the  city  to  make  certain, 
both  that  there  was  not  useless  duplication  in  giving 
milk  by  charity  organizations  to  those  who  needed 
it,  but  could  not  pay  for  it,  in  whole  or  in  part;  and 
to  see  that  all  got  milk  who  needed  it.  No  one, 
rich  or  poor,  can  afford  to  buy  unwholesome  milk, 
no  matter  how  cheap  it  is. 

Milk  not  up  to  the  proper  sanitary  standards 
should  be  so  classified  under  public  regulations  and 
sold  only  for  the  limited  purposes  for  which  it  is 
properly  useful.  Under  present  conditions  at  least 
two  grades  of  milk  should  be  provided  for  in  our 

221 


THE  PRICE  OF  MILK 

cities:  a  grade  of  raw  milk  and  a  grade  of  pasteurized 
milk.  In  addition  a  grade  of  "standardized"  milk 
may  be  permitted  as  discussed  above.1 

i  The  Commission  on  Milk  Standards  takes  the  following  position  as  to  grades 
of  milk: 

GRADES  OF  MILK 

The  commission  believes  that  nil  milk  should  be  classified  by  dividing  it  into 
three  grades,  which  shall  be  designated  by  the  letter  of  the  alphabet.  It  is  the 
sense  of  the  commission  that  the  essential  part  is  the  lettering,  and  that  all  other 
words  on  the  label  are  explanatory.  In  addition  to  the  letters  of  the  alphabet 
used  on  caps  or  labels,  the  use  of  other  terms  may  be  permitted  so  long  as  such 
terms  are  not  the  cause  of  deception.  Caps  and  labels  shall  state  whether  milk 
is  raw  or  pasteurized.  The  letter  designating  the  grade  to  which  the  milk  belongs 
shall  be  conspiciously  displayed  on  the  caps  of  "bottles  or  the  labels  of  cans. 

The  requirements  for  the  three  grades  shall  be  as  follows: 

Grade  A 

Raw  Milk. — Milk  of  this  class  shall  come  from  cows  free  from  disease,  as  deter- 
mined by  tuberculin  tests  and  physical  examinations  by  a  qualified  veterinarian, 
and  shall  be  produced  and  handled  by  employees  free  from  disease  as  determined 
by  medical  inspection  of  a  qualified  physician,  under  sanitary  conditions,  such 
that  the  bacterial  count  shall  not  exceed  10,000  per  cubic  centimeter  at  the  time 
of  delivery  to  the  consumer.  It  is  recommended  that  dairies  from  which  this 
supply  is  obtained  shall  score  at  least  80  on  the  United  States  Bureau  of  Animal 
Industry  score  card. 

Pasteurized  Milk. — Milk  of  this  class  shall  come  from  cows  free  from  disease  as 
determined  by  physical  examinations  by  a  qualified  veterinarian,  and  shall  be 
produced  and  handled  under  sanitary  conditions,  such  that  the  bacterial  count 
at  no  time  exceeds  200,000  per  cubic  centimeter.  All  milk  of  this  class  shall  be 
pasteurized  under  official  supervision,  and  the  bacterial  count  shall  not  exceed 
10,000  per  cubic  centimeter  at  the  time  of  delivery  to  the  consumer.  It  is  recom- 
mended that  dairies  from  which  this  supply  is  obtained  shall  score  at  least  65  on 
the  United  States  Bureau  of  Animal  Industry  score  card. 

Grade  B 

Milk  of  this  class  shall  coine  from  cows  free  from  disease,  as  determined  by 
physical  examinations,  of  which  one  each  year  shall  be  by  a  qualified  veterinarian, 
and  shall  be  produced  and  handled  under  sanitary  conditions,  such  that  the 
bacterial  count  at  no  time  exceeds  1,000,000  per  cubic  centimeter.  All  milk  of 
this  class  shall  be  pasteurized  under  official  supervision,  and  the  bacterial  count 
shall  not  exceed  50,000  per  cubic  centimeter  when  delivered  to  the  consumer. 

It  is  recommended  that  dairies  producing  grade  B  milk  should  be  scored,  and 
that  the  health  departments  or  the  controlling  departments,  whatever  they  may 
be,  strive  to  bring  these  scores  up  as  rapidly  as  possible. 

Grade  C 

Milk  of  this  class  shall  come  from  cows  free  from  disease,  as  determined  by 
physical  examinations,  and  shall  include  all  milk  that  is  produced  under  conditions 
such  that  the  bacterial  count  is  in  excess  of  1 ,000,000  per  cubic  centimeter. 

222 


APPENDIX  TO  CHAPTER  IX 

Legal  Standards  for  Dairy  Products 

(Reprinted  from  a  Report  to  the  Secretary  of  Agriculture.) 

By  GEOEGE  B.  TAYLOR  and  HARRY  N.  THOMAS, 
Market  Milk  Specialists,  United  States  Department  of  Agriculture. 

Summary:  A  majority  of  the  States  report  standards  for  milk  of 
3.25  per  cent  milk  fat  and  8.5  per  cent  solids  not  fat.  The  standards 
for  total  solids  vary  between  11.5  and  12  per  cent.  Ten  States  have 
bacterial  standards  for  milk.  Skim  milk  has  a  generally  recognized 
standard  for  total  solids  of  9.25  per  cent,  while  18  per  cent  butter 
fat  in  cream  is  almost  universal,  although  one  State  reports  a  15  per 
cent  standard  and  another  a  22  per  cent  standard.  Two  States  report 
standards  for  light  and  heavy  cream. 

A  majority  of  the  States  report  an  82.5  per  cent  milk  fat  standard 
for  butter.  A  peculiar  situation  exists  in  that  where  this  standard 
is  made  directly  by  legislative  action  it  is  almost  always  80  per  cent. 
On  the  other  hand,  where  authority  to  make  standards  is  delegated  to 
food  control  officials,  the  standard  for  butter  fat  is  almost  invariably 
82.5  per  cent. 

For  condensed  milk  and  cheese  the  United  States  Department  of 
Agriculture  standards  are  generally  accepted. 

California,  Indiana,  Nebraska,  Oklahoma  and  Oregon  report 
State  compulsory  pasteurization  laws  for  market  milk.  California, 
Nebraska  and  Oregon  exempt  milk  from  herds  free  from  tuberculosis. 

Indiana,  Oklahoma  and  Tennessee  require  all  products  entering 
into  the  manufacture  of  ice  cream  to  be  pasteurized.  Oklahoma 
requires  "all  milk  bought  to  be  resold"  to  be  pasteurized.  Minne- 
sota, Colorado,  Iowa,  Maryland,  Michigan  and  Pennsylvania  require 
skim  milk  from  creameries  to  be  pasteurized. 

All  milk  of  this  class  shall  be  pasteurized,  or  heated  to  a  higher  temperature, 
and  shall  contain  less  than  50,000  bacteria  per  cubic  centimeter  when  delivered  to 
the  consumer. 

Whenever  any  large  city  01  community  finds  it  necessary,  on  account  of  the 
length  of  haul  or  other  peculiar  conditions,  to  allow  the  sale  of  grade  C  milk,  its 
sale  shall  be  surrounded  by  safeguards  such  as  to  insure  the  restriction  of  its  use 
to  cooking  and  manufacturing  purposes. 

223 


THE  PRICE  OF  MILK 

Thirty-eight  cities  report  compulsory  pasteurization  of  market 
milk  in  the  absence  of  State  laws  on  this  subject. 

Twenty-one  States  and  Territories  report  that  standards  for  dairy 
products  are  obtained  by  direct  act  of  legislature;  departments  in 
twelve  States  have  used  authority  granted  by  their  legislatures, 
and  have  made  all  dairy  standards;  in  fifteen  States  standards  are 
made,  both  by  act  of  legislatures  and  food  control  or  other  depart- 
ments under  legislative  authority.  Four  States  or  Territories  report 
that  they  have  no  legal  standards  for  milk  and  milk  products. 

Pasteurization  of  market  milk  is  compulsory  in  the  following 
cities  and  states: 

Cities 

Altoona,  Pennsylvania. 
Ann  Arbor,  Michigan. 
Anniston,  Alabama. 
Atlanta,  Georgia — for  Grade  B  milk. 
Baltimore,  Maryland — except  selected  raw  milk. 
Birmingham,  Alabama — except  Grade  A  raw. 
Buffalo,  New  York. 
Charleston,  South  Carolina. 
Chicago,  Illinois. 
Cleveland,  Ohio. 

Cumberland,  Maryland — unless  cows  are  free  from  tuberculosis. 
Dayton,  Ohio. 

Detroit,  Michigan — except  certified  and  Grade  A. 
East  Orange,  New  Jersey. 
Elyria,  Ohio. 
Evanston,  Illinois. 
Findlay,  Ohio. 

Grand  Rapids,  Michigan — except  certified,  and  dairies  with  tuber- 
culosis— free  herds  and  scoring  not  less  than  75. 
Hamilton,  Ohio. 
Jersey  City,  New  Jersey. 

Lansing,  Michigan — unless  cows  are  free  from  tuberculosis. 
Minneapolis,  Minnesota. 

Newark,  New  Jersey — except  Grade  A  and  certified. 
New  York,  New  York — except  Grade  A  raw. 
Newport,  Rhode  Island — except  certified  milk. 
Norwood,  Ohio. 

224 


SANITARY  REQUIREMENTS 

Oklahoma  City,  Oklahoma — for  dairies  scoring  less  than  70. 

Philadelphia,  Pennsylvania. 

Richmond,  Virginia. 

Rochester,  Minnesota — unless  cows  are  free  from  tuberculosis. 

Rock  Island,  Illinois. 

Saint  Louis,  Missouri — except  special  grade  of  milk. 

Sandusky,  Ohio. 

Seattle,  Washington — unless  cows  are  free  from  tuberculosis. 

Spartanburg,  South  Carolina. 

Tacoma,  Washington — unless  cows  are  free  from  tuberculosis. 

West  Orange,  New  Jersey — except  certified  milk. 

Wheeling,  West  Virginia. 

States 
California5 
Indiana9 
Nebraska5 
Oklahoma17 
Oregon5 

Minnesota  requires  skim  milk  from  creameries  to  be  pasteurized 
at  180°  F. 

Tennessee  requires  pasteurization  of  milk  products  used  in  the 
manufacture  of  ice  cream. 

Pasteurization  Temperatures 

Arizona 145°  F.  for  30  minutes. 

California 140°  to  145°  F.  for  25  minutes. 

Delaware 145°  F.  for  30  minutes. 

Indiana 145°  F.  for  30  minutes  or  160°  F.  for  30  seconds. 

Massachusetts 140°  to  145°  F.  for  30  minutes. 

Nevada 140°  F.  for  25  minutes  or  170°  F.,  flash  method. 

New  York 142°  to  145°  F.  for  30  minutes. 

Oklahoma 145°  F.  for  25  minutes  or  150°  F.  for  20  minutes 

or  170°  F.,  flash  method. 

Oregon 140°  F.  for  30  minutes. 

Tennessee 145°  F.  for  30  minutes  or  165°  for  30  seconds. 

Vermont 145°  F.  for  30  minutes. 

Washington 140°  F.  for  25  minutes. 

Wyoming 145°  F.  for  30  minutes  or  165°  F.  for  30  seconds. 

These  standards  were  established  in  the  manner  indicated  under 
the  heading  ''Standards  Established  by"  in  the  tables. 
15  225 


THE  PRICE  OF  MILK 


STANDARDS 
(Numbers  in  parentheses  refer  to  Notes.) 


Milk. 

Skim 
Milk. 

Cream. 

States. 

Per 
Cent 

Per 

Cent 
Solids 

Per 

Cent 

Per 

Cent 

Per 

Cent 

Standards  Established  by 

Total 
Solids. 

not 
Fat. 

Fat. 

Total 
Solids. 

Fat. 

Alabama 

No  State  standards. 

Alaska.     . 

No  Territorial  standards. 

Arizona  

8.5 

3.25 

9.25 

18 

Act  of  legislature. 

Arkansas 

No  State  standards. 

California  

11.5 

8.5 

3 

8.8 

18 

Act  of  legislature. 

Colorado  

3 

Act  of  legislature. 

Connecticut  .  .  . 

11.75 

8.5 

3.25 

Act  of  legislature. 

Delaware  

8.5 

3.25 

18 

State  Board  of  Health  under  legislative 

authority. 

Dist.  Columbia. 

12.5 

9 

3.5 

9.3 

20 

Act  of  Congress. 

Florida  (3).... 

Legislature   provides   for   adoption   of 

Federal  standards. 

Georgia  

11.75 

8.5 

3.25 

9.25 

18 

State    Veterinarian    under    legislative 

authority. 

Hawaii  

11.5 

8.5 

3 

18 

Act  of  legislature  and  Food  Department 

under  legislative  authority. 

Idaho  

11.2 

8 

3.2 

9.3 

18 

Act  of  legislature  and  by  Public  Welfare 

Department  under  legislative  author- 

ity. 

Illinois  

8.5 

3 

9.25 

18 

Act  of  legislature  and  Food  Standard 

Commission  under  legislative  author- 

ity. 

Indiana  

8.5 

3.25 

9.25 

18 

Act  of  legislature  and  State  Board  of 

Health  under  legislative  authority. 

Iowa  

11.5 

3 

16 

By  act  of  legislature  and  Dairy  and  Food 

Commission  under  legislative  author- 

ity. 

Kansas  

8.5 

3.25 

9.25 

18 

State  Board  of  Health  under  legislative 

authority. 

Kentucky  

12 

8.5 

3.25 

(3) 

18 

State  Board  of  Health  under  legislative 

authority. 

Louisiana  

12 

8.5 

3.5 

8 

18 

Act  of  legislature  and  State  Board  of 

Health  under  legislative  authority. 

Maine 

11.75 

8.5 

3.25 

18 

Act  of  legislature 

226 


SANITARY  REQUIREMENTS 


STANDARDS — Continued 
(Numbers  in  parentheses  refer  to  Notes.) 


Milk. 

Skim 
Milk. 

Cream. 

States. 

Per 

Per 

Cent 

Per 

Per 

Per 

Standards  Established  by 

Cent 
Total 

Solids 

Cent 

Total 

Cent 

Solids. 

not 
Fat. 

Fat. 

Solids. 

Fat. 

Maryland  .    ... 

8.5 

3.25 

9.25 

18 

Legislative  act  provides  for  adoption  of 

standards  and  definitions  under  United 

States  Food  and  Drugs  Act. 

Massachusetts  . 

12 

3.35 

9.3 

15 

Act  of  legislature  and  State  Board  of 

Health  under  legislative  authority. 

Michigan  

11.5 

8.5 

3 

18 

Act  of  legislature. 

Minnesota  

13 

3.25 

20 

Act  of  legislature  and  State  Dairy  and 

Food   Commission  under   legislative 

authority. 

Mississippi.... 

(3) 

(3) 

(3) 

(3) 

18 

Law  provides  for  adoption  of  Federal 

standards.  •'-•» 

Missouri 

12 

8.75 

3.25 

9.25 

18 

Act  of  legislature. 

Montana  

11.75 

8.5 

3.25 

Act  of  legislature  and  regulations  of 

Dairy    Commissioner  under   legisla- 

tive authority. 

Nebraska  

3 

9.25 

18 

Act  of  legislature  and  Food,  Drug,  Dairy 

and  Oil  Commission  under  legislative 

authority. 

Nevada  

(3) 

(3) 

(3) 

(3) 

22 

Legislative   act    provides   for   Federal 

standards. 

New  Hampshire 

11.85 

(12) 

3.35 

8.50 

18 

Act  of  legislature  and  State  Board  of 

Health  under  legislative  authority. 

New  Jersey  

11.5 

8.5 

3 

16 

Act  of  legislature  and  Food  Department 

under  legislative  authority. 

New  Mexico.  .  . 

No  State  standards. 

New  York  

11.5 

3 

18 

Act  of  legislature  and  Public  Health 

Council  under  legislative  authority. 

North  Carolina 

11.75 

8.5 

3.25 

9.25 

18 

State    Agriculture    Department   under 

legislative  authority. 

North  Dakota  . 

(15) 

18 

Food     Department    under    legislative 

authority. 

Ohio  

12 

9 

3 

Act  of  legislature. 

Oklahoma  

12 

8.5 

3.5 

18 

State  Board  of  Agriculture  under  leg- 

islative authority. 

227 


THE  PRICE  OF  MILK 

STANDARDS — Continued 
(Numbers  in  parentheses  refer  to  Notes.) 


Milk. 

Skim 
Milk. 

Cream. 

States. 

Per 

Per 

Cent 

Per 

Per 

Per 

Standards  Established  by 

Cent 
Total 

Solids 

Cent 

Cent 
Total 

Cent 

Solids. 

not 
Fat. 

Fat. 

Solids. 

Fat. 

Oregon  

11.7 

8.5 

3.2 

18 

Act  of  legislature. 

Pennsylvania.  . 

12 

(18) 

3.25 

18 

Act  of  legislature. 

Philippine  Isl  .  . 

11.75 

8.5 

3.25 

(3) 

18 

By  Health  Department  under  legislative 

authority. 

Porto  Rico  

(3) 

(3) 

(3) 

(3) 

(3) 

United  States  Food  and  Drugs  Act  and 

Board  of  Health  under  legislative 

authority. 

Rhode  Island.. 

12 

2.5 

18,40 

Food  and  Dairy  Departments  under  leg- 

islative authority. 

South  Carolina  . 

11.5 

8.25 

3.25 

Act  of  legislature. 

South  Dakota  .  . 

11:75 

8.5 

3.25 

9.25 

18 

Act  of  legislature. 

Tennessee  

8.5 

3.25 

Act  of  legislature. 

Texas  (3)  .  . 

Food  and  Drug  Department  under  leg- 

islative authority. 

[18] 

Utah  

12 

8.8 

3.2 

9 

M 

Act  of  legislature. 

W 

Vermont  

11.75 

8.5 

3.25 

9.25 

18 

Act  of  legislature  and  State  Board  of 

Health  under  legislative  authority. 

Virginia  

11.75 

8.5 

3.25 

18 

Food    Department    under    legislative 

authority. 

Washington... 

8.5 

3.25 

8.8 

18 

Act  of  legislature 

West  Virginia.. 

12 

3 

16 

Public  Health  Council  under  legislative 

authority. 

Wisconsin  

8.5 

3 

9 

18 

Act  of  legislature. 

Wyoming  

8.5 

3.25 

9.25 

18 

Dairy,  Food  and  Oil  Department  under 

legislative  authority. 

Note:  The  standards  in  the  above  table  and  in  the  table  follow- 
ing were  obtained  through  questionnaires  and  personal  letters  sent 
out  by  the  Dairy  Division  of  the  U.  S.  Department  of  Agriculture 
from  April  to  July,  1919. 


228 


SANITARY  REQUIREMENTS 


STANDARDS 
(Numbers  in  parentheses  refer  to  Notes.) 


States. 

Butter. 

Condensed  Milk. 

Ice  Cream. 
Per  Cent  Fat. 

Cheese. 
Per  Cent  Fat- 

Sweetened. 

Unsweetened. 

Per 

Cent 
Fat. 

Per 
Cent 
Mois- 
ture. 

Per 
Cent 
Fat. 

Per 
Cent 
Total 
Milk 
Solids. 

Per 
Cent 
Fat. 

Per 
Cent 
Total 
Solids. 

Plain. 

Fruit 
or 

Nut. 

Whole 
Milk. 

Skim 
Milk. 

Alabama 

Alaska 

8 

8 
10 
6 

50 

50 
50 

(4) 
(6) 

Arizona  

80 

16 

7.7 

28 

(3) 
28 

7.7 

(3) 

7.7 

28 

(3) 
24 

10 

10 
10 

8 

Arkansas 

California  
Colorado 

80 
80 

16 

(3) 

7.7 

Connecticut 

Dist.  of  Columbia 
Florida  (3)  
Georgia 

83 
82  5 

12 

(3) 
34.3 
25.5 
25.5 
(3) 
25.5 
(3) 
25.5 

25.5 

(3) 
(3) 
33.3 
25.5 
28 

8(8) 
14 
14 
8 
8 
12 
14 
14 
10 
14 

•{ 

7 
10 
12 
12.5 
8 
10 
14 
(3) 
14 

8 
12 
12 
8 
8 
10 
12 
12 
8 
12 

J<10) 

7 
8 
12 
10 
8 
9 
12 
(3) 
14 

50 

(3) 
50 
50 
50 
(3) 
50 
(3) 

50 

(3) 
30 

50 
50 
50 

(3) 
(3) 

(3) 

(3) 
(3) 

(3) 

• 

25 

(3) 

Hawaii  
Idaho  
Illinois 

(3) 
82.5 
82.5 

(3) 

7.7 
8. 
(3) 
(3) 
8 
(3) 
8 

8 

(3) 
(3) 
8 
8 
8 

(3) 
28 
28 
(3) 
(3) 
28 
(3) 
28 

28 

(3) 
(3) 
28 
28 
28 

(3) 
7.8 
7.8 
7.8 
(3) 
7.8 
(3) 
7.8 

7.8 

(3) 
(3) 
7.8 
7.8 
8 

Indiana  .... 

82.5 

(3) 
80 
(3) 
82.5 

82.5 

(3) 
80 

82.5 
82.5 
82.5 

16 

16 
16 
16 

16 

16 
16 

Iowa  

Kansas  
Kentucky  
Louisiana 

Maine  
Maryland  

Massachusetts.  .  . 
Michigan  
Minnesota  

Mississippi  
Missouri  
Montana  
Nebraska 

Nevada  

80 
82  5 

16 

(3) 
(3) 

(3) 
(3) 

(3) 
(3) 

(3) 
(3) 

New  Hampshire  .  . 
New  Jersey 

Under  30; 


229 


THE  PRICE   OF  MILK 


STANDARDS — Continued 
(Numbers  in  parentheses  refer  to  Notes.) 


Condensed  Milk. 

Ice  Cream. 

Cheese. 

Butter. 

Sweetened. 

Unsweetened. 

Per  Cent  Fat. 

Per  Cent  Fat. 

States. 

Per 

Cent 
Fat. 

Per 
Cent 
Mois- 
ture. 

Per 
Cent 
Fat. 

Per 
Cent 
Total 
Milk 

Per 
Cent 
Fat. 

Per 
Cent 
Total 
Solids. 

Plain. 

Fruit 
or 

Nut. 

Whole 
Milk. 

Skim 
Milk. 

Solids. 

New  Mexico  

New  York  

g 

28 

7.8 

25.5 

| 

13 

North  Carolina... 

82.5 

16 

8 

28 

10 

8 

50 

18 

North  Dakota.... 

15 

(3) 

(3) 

(3) 

(3) 

10 

10 

(3) 

(3) 

Ohio  

/ 

25%  of 

\ 

3o( 

under 

Oklahoma  

82.5 

16 

* 

T.S. 

' 

10 

8 

* 

20 

Oregon  

80 

16 

7.8 

25.5 

8 

6 

50 

Pennsylvania.  .  .  . 

32 

(19) 

Philippine  Islands 

82.5 

8 

28 

7.8 

25.5 

14 

12 

50 

(3) 

Porto  Rico  

(3) 

(3) 

(3) 

(3) 

(3) 

(3) 

(3) 

(3) 

(3) 

(3) 

Rhode  Island  . 

84 

16 

,n\ 

(3) 

(3) 

(3) 

South  Carolina... 

8 

South  Dakota.... 

80 

7.6 

28 

7.6 

28 

14 

12 

50 

Tennessee  

8 

8 

Texas  (3)  

Utah  

80 

16 

7.8 

7.8 

25.5 

14 

12 

(3) 

(3) 

Vermont  

82.5 

(3) 

(3) 

(3) 

(3) 

14 

12 

(3) 

(3) 

Virginia.   . 

(3) 

16 

/q\ 

(3) 

(3) 

(3) 

8 

8 

50 

Washington  

80 

7.8 

25.5 

7.8 

25.5 

8 

8 

50 

(20) 

West  Virginia.... 

8 

8 

Wisconsin  

82.5 

8 

28 

8 

28 

14 

12 

50 

Wyoming  

82.5 

16 

7.8 

34.3 

7.8 

25.5 

14 

12 

50 

Bacteria  Standards 

The  only  States  that  have  adopted  bacteria  standards  are  tha 
following: 

California. — In  milk,  as  Note  (1);  cream,  as  Note  (2). 
Delaware.— In  milk,  100,000  per  c.c.;  cream,  as  Note  (7). 
Georgia.— In  milk,  500,000  per  c.c. 
230 


SANITARY  REQUIREMENTS 

Hawaii.— In  milk,  1,000,000  per  c.c. 

Idaho.— In  milk,  500,000  per  c.c.;  cream,  500,000  per  c.c. 

New  Hampshire. — In  milk,  500,000  per  c.c. 

New  York. — In  milk  and  cream,  as  Note  (13). 

Oklahoma. — In  milk,  as  Note  (16). 

Porto  Rico.— In  milk,  100,000  per  c.c. 

Vermont.— In  milk,  200,000  per  c.c. 

Washington.— In  milk,  400,000  per  c.c. 

NOTES 

(1)  Grade  A,  raw—less  than  100,000  bacteria  per  c.c. 

Grade  A,  pasteurized— less  than  200,000  bacteria  per  c.c.  before  pasteurization;  less  than 

15,000  after  pasteurization. 
Grade  B— less  than  1,000,000  bacteria  per  c.c.  before  pasteurization;  less  than  50,000 

after  pasteurization. 

(2)  Not  more  than  two  times  the  bacteria  in  the  corresponding  grade  of  milk. 

(3)  United  States  Department  of  Agriculture  Standards. 

(4)  Half  skim,  25  per  cent  fat. 

(5)  Unless  milk  is  from  herds  free  from  tuberculosis  as  evidenced  by  the  tuberculin  tests. 

(6)  Less  than  50  per  cent  of  total  solids. 

(7)  Haw  cream— less  than  500,000  bacteria  c.c.      Pasteurized  cream— less  than  250,000 

bacteria  per  c.c. 

(8)  Bacteria  standard  for  ice  cream  is  500,000  per  c.c. 

(9)  Compulsory  pasteurization  of  milk  products  entering  into  the  manufacture  of  ice  cream. 
(10    Fruit  ice  cream,  4  per  cent  fat;  nut  ice  cream,  6  per  cent  fat. 

(11)  Skim  milk  from  creameries  required  to  be  pasteurized  to  180°  F. 

(12)  "By  terms  of  law  enacted  in  1917,  provision  is  made  for  the  sale  of  milk,  provided  that 

such  be  'pure  natural  milk'  and  that  'every  can,  bottle,  or  other  container  in  which  such 
milk  is  shipped,  sold  or  delivered,  at  wholesale  or  retail,  is  plainly  labeled  so  as  to  show 
its  guaranteed  composition.' " 

(13)  Grade  A,  raw: 

Milk— not  more  than  60,000  bacteria  per  c.c. 

Cream— not  more  than  300,000  bacteria  per  c.c. 

Grade  A,  pasteurized:    (Milk  or  cream  before  pasteurization,  not  more  than  200,000 
bacteria  per  c.c.) 

Milk— not  more  than  30,000  bacteria  per  c.c. 

Cream— not  more  than  150,000  bacteria  per  c.c. 
Grade  B,  raw: 

Milk— not  more  than  200,000  bacteria  per  c.c. 

Cream — not  more  than  750,000  bacteria  per  c.c. 

Grade  B,  pasteurized:    (Milk  or  cream  before  pasteurization,  not  more  than  1,500,000 
bacteria  per  c.c.) 

Milk— not  more  than  100,000  bacteria  per  c.c. 

Cream— not  more  than  500,000  bacteria  per  c.c. 

(14)  Cheese  made  from  skimmed  or  partially  skimmed  milk  must  be  branded  with  the  words, 

"Skimmilk  Cheese";  if  it  contains  13  per  cent  milk  fat  or  over,  it  may  be  branded, 
"Medium  Skimmilk  Cheese",  or  if  it  contains  18  per  cent  of  milk  fat  or  over,  it  may  be 
branded  "Special  Skimmilk  Cheese." 

231 


THE  PRICE  OF  MILK 

(15)  Normal  milk  with  no  fat  or  solids  removed  and  no  adulteration. 

(16)  "Bottled  raw  milk  must  not  contain  more  than  100,000  bacteria  from  May  1  until  October 

1.     All  pasteurized  bottled  milk  more  than  50,000  in  the  same  period  of  time.  .  .  . ' 

(17)  "All  milk  and  cream  used  in  manufacture  of  creamery  butter  and  ice  cream  for  commercial 

purposes,  and  all  milk  bought  to  be  resold,  must  be  pasteurized.  ..." 

(18)  "If  a  person  accused  of  violating  section  one  of  this  act  shall  furnish  satisfactory  affidavit 

that  nothing  has  been  added  to  or  taken  from  the  milk  in  question,  which  is  otherwise 
pure  and  wholesome,  and  is  not  below  three  (3)  per  centum  of  butter  fat ...  no 
prosecution  shall  be  instituted  against  said  person." 

(19)  Cheese— Full  cream,  not  less  than  32  per  cent  butter  fat. 

Three-fourths  cream  not  less  than  24  per  cent  butter  fat. 
One-half  cream  not  less  than  16  per  cent  butter  fat. 
One-fourth  cream  not  less  than  8  per  cent  butter  fat. 
Skimmed— less  than  8  per  cent  butter  fat. 

(20)  Cheese— Half  skim  not  less  than  25  per  cent  butter  fat. 

Quarter  skim  not  less  than  12  per  cent  butter  fat. 

U.  S.  DEPARTMENT  OF  AGRICULTURAL  STANDARDS 
Milk  and  Its  Products 

1.  Milk  is  the  whole,  fresh,  clean,  lacteal  secretion  obtained  by 
the  complete  milking  of  one  or  more  healthy  cows,  properly  fed 
and  kept,  excluding  that  obtained  within  fifteen  days  before  and 
five  days  after  calving,  or  such  longer  period  as  may  be  necessary 
to  render  the  milk  practically  colostrum-free. 

2.  Blended  Milk  is  milk  modified  in  its  composition  so  as  to  have 
a  definite  and  stated  percentage  of  one  or  more  of  its  constituents. 

3.  Pasteurized  Milk  is  milk  that  has  been  subjected  to  a  tempera- 
ture not  lower  than  145  degrees  Fahrenheit  for  not  less  than  thirty 
minutes.     Unless  it  is  bottled  hot,  it  is  promptly  cooled  to  50 
degrees  Fahrenheit  or  lower. 

4.  Sterilized  Milk  is  milk  that  has  been  heated  at  the  temperature 
of  boiling  water  or  higher  for  a  length  of  time  sufficient  to  kill  all 
organisms  present. 

5.  Homogenized  Milk  is  milk  that  has  been  mechanically  treated 
in  such  a  manner  as  to  alter  its  physical  properties  with  particular 
reference  to  the  condition  and  appearance  of  the  fat  globules. 

6.  Skimmed  Milk  is  milk  from  which  substantially  all  of  the 
milk  fat  has  been  removed. 

7.  Buttermilk  is  the  product  that  remains  when  fat  is  removed 
from  milk  or  cream,  sweet  or  sour,  in  the  process  of  churning. 
It  contains  not  less  than  eight  and  five-tenths  (8.5)  per  cent  of 
milk  solids  not  fat. 

8.  Goat's  Milk,  Ewe's  Milkt  et  cetera,  are  the  fresh,  clean,  lacteal 

232 


SANITARY  REQUIREMENTS 

secretions,  free  from  colostrum,  obtained  by  the  complete  milking 
of  healthy  animals  other  than  cows,  properly  fed  and  kept,  and 
conform  in  name  to  the  species  of  animal  from  which  they  are 
obtained. 

9.  Condensed  Milk,  Evaporated  Milk,  Concentrated  Milk,  is  the 
product  resulting  from  the  evaporation  of  a  considerable  portion 
of  the  water  from  the  whole,  fresh,  clean,  lacteal  secretion  obtained 
by  the  complete  milking  of  one  or  more  healthy  cows,  properly 
fed  and  kept,  excluding  that  obtained  within  fifteen  days  before 
and  ten  days  after  calving,  and  contains,  all  tolerances  being  allowed 
for,  not  less  than  twenty-five  and  five-tenths  (25.5)  per  cent  of 
total  solids,  and  not  less  than  seven  and  eight-tenths  (7.8)  per  cent 
of  milk  fat. 

10.  Sweetened    Condensed    Milk,    Sweetened    Evaporated    Milk, 
Sweetened  Concentrated  Milk,   is  the  product  resulting  from  the 
evaporation  of  a  considerable  portion  of  the  water  from  the  whole, 
fresh,  clean,  lacteal  secretion  obtained  by  the  complete  milking  of 
one  or  more  healthy  cows,  properly  fed  and  kept,  excluding  that 
obtained  within  fifteen  days  before  and  ten  days  after  calving,  to 
which  sugar  (sucrose)  has  been  added.     It  contains,  all  tolerances 
being  allowed  for,  not  less  than  twenty-eight  (28)  per  cent  of  total 
milk  solids,  and  not  less  than  eight  (8)  per  cent  of  milk  fat. 

11.  Condensed  Skimmed  Milk,  Evaporated  Skimmed  Milk,  Con- 
centrated Skimmed  Milk,  is  the  product  resulting  from  the  evapora- 
tion of  a  considerable  portion  of  the  water  from  skimmed  milk, 
and  contains,  all  tolerances  being  allowed  for,  not  less  than  twenty 
(20)  per  cent  of  milk  solids. 

12.  Sweetened  Condensed  Skimmed  Milk,  Sweetened  Evaporated 
Skimmed  Milk,  Sweetened  Concentrated  Skimmed  Milk,  is  the  pro- 
duct resulting  from  the  evaporation  of  a  considerable  portion  of 
the  water  from  skimmed  milk  to  which  sugar  (sucrose)  has  been 
added.     It  contains,  all  tolerances  being  allowed  for,  not  less  than 
twenty-eight  (28)  per  cent  of  milk  solids. 

13.  Dried  Milk  is  the  product  resulting  from  the  removal  of 
water  from  milk,  and  contains,  all  tolerances  being  allowed  for, 
not  less  than  twenty-six  (26)  per  cent  of  milk  fat,  and  not  more 
than  five  (5)  per  cent  of  moisture. 

14.  Dried  Skimmed  Milk  is  the  product  resulting  from  the  removal 
of  water  from  skimmed  milk,  and  contains,  all  tolerances  being 
allowed  for,  not  more  than  five  (5)  per  cent  of  moisture. 

233 


THE  PRICE  OF  MILK 

15.  Malted  Milk  is  the  product  made  by  combining  whole  milk 
with  the  liquid  separated  from  a  mash  of  ground  barley  malt  and 
wheat  flour,  with  or  without  the  addition  of  sodium  chlorid,  sodium 
bicarbonate,  and  potassium  bicarbonate,  in  such  a  manner  as  to 
secure  the  full  enzymic  action  of  the  malt  extract  and  by  removing 
water.  The  resulting  product  contains  not  less  than  seven  and 
one-half  (7.5)  per  cent  of  butter  fat,  and  not  more  than  three  and 
one-half  (3,5)  per  cent  of  moisture, 


234 


CHAPTER  X 
How  Shall  Milk  be  Distributed 

City  consumers  as  a  rule  now  get  their  daily  supply 
of  milk  either  by  going  to  the  retail  store  for  it  or 
by  daily  delivery  to  the  door  by  the  retail  milk 
wagon.  Through  either  of  these  channels  the  milk 
may  be  delivered,  dipped,  into  containers  brought 
by  the  consumer,  or  may  be  delivered  in  bottles 
filled  at  the  milk  plant.  The  retail  wagon  may  be 
driven  by  the  milk  producer  himself  or  it  may  be 
one  of  many  belonging  to  a  city  distributor. 

The  retail  store,  whether  it  be  a  grocery  or  drug 
store  or  a  branch  store  owned  by  the  milk  company, 
may  carry  milk  chiefly  as  an  accommodation  to  its 
patrons  or  it  may  act  as  the  chief,  if  not  the  only, 
source  for  the  family  milk  supply.  Which  of  these 
services  should  the  retail  store  furnish? 

For  the  extra  supply  of  milk  needed  by  the  house- 
wife the  retail  stores  furnish  an  essential  service. 
The  housewife  may  need  an  extra  bottle  for  a  dessert 
planned  after  the  milkman  has  passed  for  the  day. 
Or  the  iceman  has  forgotten  to  leave  ice,  and  the 
milk  is  sour.  For  such  occasions  it  is  well  to  have  a 
store  within  walking  distance  at  which  this  unusual 
need  may  be  met.  If  the  retail  stores  furnish  only 
the  occasional  need,  their  prices  can  be  above  those 
of  the  retail  milk  wagons  and  no  adverse  social 
consequences  result  therefrom. 

235 


THE  PRICE  OF  MILK 

Should  the  retail  store  be  the  main  source  of 
supply  for  the  family,  leaving  the  retail  wagon  to 
furnish  only  those  homes  desiring  to  pay  for  delivery 
direct  to  the  door?  In  other  words,  which  is  to 
have  first  place  as  a  retail  agency,  the  store  or  the 
milk  wagon?  The  answer  to  this  question  requires 
answer  to  three  questions: 

(1)  Which  of  these  two  agencies  is  the  cheaper  in 
cost  to  the  consumer? 

(2)  What  has  been  the  experience  with  '  'cash  and 
carry"  plans? 

(3)  Should  milk  be  sold  dipped  or  bottled? 

The  margin  taken  by  the  average  grocery  store 
for  carrying  bottled  milk  ranges  from  one  to  two 
cents  per  quart;  about  one-half  taking  a  margin 
of  two  cents  or  above,  and  one-half  a  margin  of  from 
one  to  two  cents.  The  margin  taken  by  the  store 
for  selling  dipped  milk  ranges  from  one-half  to  one 
cent  per  quart. 

Professor  H.  E.  Erdman,  of  Ohio  State  University, 
who  has  studied  the  costs  in  handling  bottled  milk 
in  stores,  found  that  the  cost  of  ice  per  bottle  for 
the  summer  months  ranged  from  0.087  to  0.417  of  a 
cent  with  a  weighted  average  of  a  quarter  of  a  cent 
(0.221)  per  bottle.  To  this  ice  cost  must  be  added 
labor  costs,  risks  and  overhead.  Retail  storekeepers 
in  New  York  City  told  representatives  of  the  Food 
Administration  that  their  "costs"  averaged  about 
three-quarters  of  a  cent  per  quart  for  dipped  milk, 
exclusive  of  sours  and  other  risks. 

236 


HOW  SHALL  MILK  BE  DISTRIBUTED 

The  amount  of  losses  from  sour  milk  and  "returns" 
vary  with  trade  practices.  If  the  milk  dealer  takes 
this  risk  the  cost  is  transferred  to  his  books.  But 
the  cost  is  ever  present  and  material.  So  it  is  with 
bottles.  "Cost"  to  the  groceryman  mounts  if  the 
dealer  holds  him  responsible  for  bottles.  Moreover, 
the  demand  varies  from  day  to  day  and  hence  the 
store  is  confronted  with  losses  from  milk  not  sold, 
or  the  entire  trade  is  not  supplied.  The  milk  dealer 
can  afford  proper  facilities  for  taking  care  of  milk 
not  sold. 

Milk  in  the  small  store  cannot  be  inspected  either 
for  watering  or  as  to  sanitary  conditions  as  effectively 
as  can  milk  of  the  professional  milk  distributor. 
The  latter  has  a  larger  trade  and  much  more  to  lose 
from  adverse  publicity  than  has  the  former.  Rarely, 
City  Health  Departments  have  wanted  to  keep  the 
stores  because  they  pay  license  fees  to  the  Health 
Department. 

The  quantities  handled  by  stores  reflect  the  trade 
policy  as  to  price.  In  Philadelphia  only  the  excep- 
tional retailer  handles  as  much  as  20  quart  bottles 
and  20  pint  bottles  daily,  and  3500  stores  retail  milk. 
Milk  from  the  store  in  Philadelphia  retails  usually 
at  a  margin  of  two  cents  above  the  price  for  milk 
delivered  from  the  retail  wagon.  In  Columbus, 
Ohio,  with  one-tenth  the  population  of  Philadelphia, 
over  800  stores  retail  milk.  These  stores  handled 
in  1918  on  the  average1  22.5  quart  bottles  and  26 
pint  bottles  daily  as  against  an  average  of  less  than 

1  From  Professor  Erdman. 

237 


THE  PRICE  OF  MILK 

ten  quarts  and  as  many  pints  in  the  retail  store  in 
Philadelphia.  In  Columbus  the  price  for  milk  at 
the  store  was  the  same  as  from  the  retail  milk  wagon. 

"Costs"  on  units  as  small  as  milk  bottles  and  in 
quantities  so  limited  as  just  given  are  illusive  at  the 
best.  The  acid  test  is:  what  will  retail  stores  handle 
milk  for?  Grocers  inevitably  refuse  to  handle 
bottled  milk  at  a  margin  less  than  one  cent  per 
bottle  and  many  abandon  the  service  at  a  margin 
under  two  cents.  Most  grocers  prefer  not  to  handle 
milk  at  all  unless  it  is  advisable  to  do  so  because 
others  do.  Grocers  in  New  York  City  have  handled 
dipped  milk  at  a  margin  of  one-half  a  cent  per  quart 
for  a  few  months,  but  desire,  and  frequently  get, 
a  margin  of  at  least  one  cent  with  an  average  around 
three-fourths  of  a  cent  per  quart. 

Can,  and  does,  the  retail  wagon  perform  these 
same  services  at  a  lower  margin?  The  answer  is 
definite.  The  saving  in  delivery  of  milk  in  quantities 
desired  by  grocery  stores  does  not  amount  to  as 
much  as  one-half  a  cent  per  quart.  The  author  is 
aware  of  cost  records  showing  that  special  wholesale 
route  automobiles,  delivering  in  large  quantities 
only  to  stores  in  a  congested  retail  district,  perform 
their  services  at  an  apparent  saving  of  one  cent  per 
quart  over  the  cost  of  house-to-house  delivery  on  the 
retail  wagon.  But  this  does  not  represent  the  cost 
of  delivering  milk  wholesale  to  all  retail  stores— 
those  in  the  suburbs  as  well  as  those  in  congested 
centers.  When  these  costs  are  taken  into  considera- 
tion the  average  saving  of  delivery  in  quantities 

238 


HOW  SHALL  MILK  BE  DISTRIBUTED 

to  retail  stores  does  not  amount  to  one-half  cent 
per  quart  on  all  the  deliveries  as  compared  with  the 
cost  of  delivering  to  the  consumer. 

Grocerymen  prefer  not  to  handle  milk,  if  at  all, 
at  less  than  one  cent  per  quart;  milk  dealers  with 
cost  records  would  prefer  not  to  sell  to  grocery 
stores  at  so  little  discount  as  one-half  cent  per  quart 
from  their  house-to-house  price.  The  retail  wagon 
performs  the  same  service  at  less  cost  than  can  the 
retail  store.  And  this  regardless  of  the  fact  that 
the  consumer  herself  does  the  delivery  work  for  the 
retail  store. 

One  of  the  reasons  for  this  lies  in  the  loss  in  bottles. 
At  the  present  price  for  bottles,  the  bottle  cost  on 
store  trade  alone  averages  over  one-fourth  of  a  cent 
per  trip,  twenty  trips  for  a  five-cent  bottle.  It  is 
not  difficult  to  get  consumers  in  the  habit  of  setting 
bottles  out  regularly  at  the  back  door  for  the  regular 
morning  delivery.  But  the  milk  industry,  thus  far, 
certainly  has  not  learned  the  art  of  getting  cus- 
tomers to  return  bottles  to  the  retail  store.  The 
higher  rate  of  loss  on  bottles  alone  in  grocery  store 
trade  more  than  eats  up  any  economy  in  delivering 
limited  quantities  to  one  grocery  store  as  compared 
with  house-to-house  del^gp^^^The  same  territory 
is  traversed  anyway,  and  a  milk  route  horse  is  soon 
taught  to  do  much  of  the  delivery  work.  ^^ 

To  promote  social  and  individual  well-being  there 
must  be  regularity  in  milk  consumption.  But 
people  will  not  go  to  the  stores  regularly  for  their 
milk.  The  maid  is  out  or  the  children  are  late  for 

239 


THE  PRICE  OF  MILK 

school,  or  the  mother  has  company,  or  nothing  else 
is  needed  from  the  store.  Retail  delivery  to  the 
door  not  only  keeps  the  milk  on  the  retail  wagon 
that  would  otherwise  go  through  the  store  but  it 
increases  milk  consumption  because  of  regularity 
in  consumption,  thus  adding  to  the  retail  load, 
shortening  the  haul  and  lowering  unit  delivery  costs. 

In  November  of  1917,  H.  P.  Hood  &  Sons  of 
Boston,  in  consultation  with  the  Local  Food  Admin- 
istrator, opened  .a  number  of  special  "cash  and 
carry"  stores  throughout  Boston,  to  the  end  that 
those  consumers  who  wanted  to  carry  their  milk 
could  benefit  from  any  savings  therefrom.  This 
plan  was  tried  for  a  period  of  about  six  weeks.  Milk 
before  this  experiment  was  selling  from  the  retail 
wagon  at  14  cents  per  quart.  Soon  the  stores  were 
selling  the  milk  at  cost,  as  a  "leader",  at  11  cents 
per  quart.  The  retail  wagons  largely  lost  their 
trade.  There  was  no  evidence  of  increased  consump- 
tion because  of  the  lower  price. 

Assistant  Attorney  General  Seagrave  of  Massa- 
chusetts thus  summarized  the  results  of  the  experi- 
ment: 

I  have  been  requested  to  communicate  my 
views  to  you  relative  to  the  effect  of  the  so-called 
"cash  and  carry"  system  as  applied  to  the  milk 
business  in  Boston,  which  has  recently  been  given 
a  test  for  some  six  weeks. 

Certain  milk  depots  were  opened  where  milk 

was  sold  under  the  ticket  system  of  ten  quarts 

for  a  dollar,  or  11  cents  cash.     The  system  was 

instituted  by  one  of  the  large  dealers  with  the 

240 


HOW  SHALL  MILK  BE  DISTRIBUTED 

approval  of  the  Food  Administrator.  The  im- 
mediate result  was  the  fixing  of  similar  rates  in 
every  milk  depot  and  store  in  Greater  Boston. 
At  first  the  sales  were  reasonably  large,  but  in  a 
few  days  the  novelty  wore  off  and  sales  commenced 
to  drop.  In  the  meantime,  nearly  every  milk 
route  was  disorganized,  at  a  great  loss  to  the 
dealers,  all  of  whom  lost  money,  and  some  of  the 
smaller  dealers  were  practically  forced  out  of  busi- 
ness or  else  so  badly  involved  that  such  will  be  the 
ultimate  result.  In  my  opinion  the  introduction 
of  this  system  was  a  great  mistake  and  has  de- 
moralized conditions  in  the  milk  business  ever 
since.  As  another  result  of  the  ruinous  com- 
petition, the  price  to  the  farmers  was  dropped 
one-half  cent  a  quart.  It  is  my  opinion  that 
there  is  no  real  economy  in  selling -milk  in  this 
manner.  Even  if  every  consumer  carried  his  own 
supply  from  the  stores,  the  additional  clerks,  the 
keeping  of  all  stores  open  on  Sundays,  the  cost  of 
refrigeration  and  icing  in  summer,  and  other  in- 
cidental expenses  would  bring  the  cost  up  as  high 
as  that  of  the  delivery  system,  even  though  nothing 
were  allowed  for  the  trouble  and  inconvenience 
which  the  system  must  bring  about.  In  order  to 
attract  the  trade  the  price  must  be  abnormally 
low. 

The  result  of  the  experiment  here  has  been,  in 
my  opinion,  disastrous. 

During  the  war  period  the  author  sent  a  special 
investigator1  to  cities  where  the  Food  Administrator 
was  trying  out  "cash  and  carry "  plans  of  any  kind 
for  milk,  with  instructions  to  ascertain:  (1)  Whether 
these  plans  brought  milk  to  the  consumer  at  a  lower 

i  Mr.  K.  E.  Carlson. 

16  241 


THE  PRICE  OF  MILK 

price;  (2)  whether  the  consumer  went  regularly  for 
the  milk;  (3)  whether  per  capita  milk  consumption 
was  higher  or  lower  under  such  plans;  (4)  whether 
workers  in  charitable  organizations  and  others  con- 
cerned in  keeping  milk  to  the  consumer  at  as  low  a 
price  as  possible  favored  such  "cash  and  carry " 
plans;  and  (5)  what  the  attitude  of  health  depart- 
ments was  as  to  dipped  milk  if  the  "cash  and 
carry "  plans  included  dipped  milk.  Among  the 
cities  visited  to  secure  this  information  were  Boston 
and  Springfield,  Massachusetts;  Pittsburgh,  Phila- 
delphia and  Wilkes-Barre,  Pennsylvania,  and  New 
York  City.  As  a  rule  the  following  conclusions  were 
reached  on  each  of  the  above  points  respectively: 
(1)  These  plans  tended  to  increase  the  cost  to  all 
consumers  by  decreasing  the  load  on  the  retail 
wagons,  though  the  price  paid  by  those  who  carried 
their  milk  was  about  one  cent  per  quart  lower  than 
that  for  milk  delivered  to  the  door;  (2)  consumers 
did  not  go  regularly  for  their  milk  and  as  a  rule 
returned  to  the  retail  wagon  for  their  regular  daily 
supply  as  soon  as  the  novelty  of  the  "cash  and 
carry "  plan  had  worn  off;  (3)  the  per  capita  con- 
sumption of  milk  in  families  using  the  "cash  and 
carry "  plan  was  lower  than  in  the  same  families 
when  milk  was  delivered  regularly  to  their  doors; 
(4)  the  most  of  the  workers  interviewed  in  charitable 
organizations  were  not  impressed  with  "cash  and 
carry"  plans,  since  those  most  in  need  of  a  regular 
supply  of  wholesome  milk  in  good  condition- 
mothers  and  the  sick — so  often  could  not  avail 

242 


HOW  SHALL  MILK  BE  DISTRIBUTED 

themselves  of  this  source;  and  (5)  with  but  one 
exception  the  health  officials  interviewed  opposed 
dipped  milk  on  sanitary  grounds. 

Not  so  many  years  ago  most  milk  was  delivered 
as  dipped  milk,  whether  from  the  retail  wagon  or 
from  the  grocery  store.  Today  New  York  City  is 
the  only  city  in  the  United  States  of  any  size  in 
which  public  policies  favor  the  sale  of  dipped  milk 
from  retail  stores.  In  the  other  cities  either  public 
policies  as  to  sanitation  or  the  preference  of  the 
consumers  for  the  bottled  milk  delivered  at  the 
door  in  a  refrigerated  condition,  or  both,  have  dis- 
couraged the  distribution  of  milk  from  the  retail 
store  in  containers  brought  by  the  consumer,  and 
have  encouraged  milk  distribution  in  bottles  by 
retail  wagons  direct  to  the  consumer.  For  these 
reasons  the  sale  of  dipped  milk  from  the  retail 
wagon  has  practically  ceased  to  exist. 

The  advantages  urged  for  the  policy  of  selling 
dipped  milk  at  the  grocery  store  are: 

(1)  The  cost  of  the  bottle  is  eliminated. 

(2)  The  cost  of  wholesale  delivery  by  the  milk 
dealer  in  cans,  in  the  quantities  taken  by  the  grocery 
stores,  is  lower  than  is  the  cost  of  distributing  quart 
and  pint  bottles  to  the  consumer  by  retail  milk 
wagons. 

(3)  Because  of  these  lower  costs  this  method 
offers  the  cheapest  method  of  milk  distribution. 

The  disadvantages  of  dipped  milk  are: 
(1)  The  inspection  force  adequate  to  assure  the 
sanitary  handling  of  bulk  milk  by  the  grocery  store 

243     ' 


THE  PRICE  OF  MILK 

would  have  to  be  so  large  as  to  underwrite  through 
taxation  much  of  the  economies  possible  through 
elimination  of  the  bottles. 

(2)  The    milk    is    carried    home   in    containers 
improperly  sterilized,  exposed  to  the  dust  of  the 
street  and  the  home.     As  the  city  dust  of  today  is 
made  of  the  spittings  of  yesterday  this  can  scarcely 
be  regarded  as  adequate  protection  from  dust-borne 
diseases. 

(3)  The  consumption  of  milk  is  not  as  large  per 
capita  because  irregular  for  reasons  stated  above. 

To  take  forty-five  quarts  (three  stores  at  fifteen 
quarts  each)  off  the  retail  wagon  is  to  cut  the  profit 
on  the  retail  trade.  To  put  part  of  the  milk  through 
grocery  stores  and  part  through  the  retail  wagon 
is  a  costly  duplication  for  which  the  consumer  pays. 

But  even  assuming  that  stores  can  be  inspected 
often  enough  to  assure  sanitary  conditions,  there  is 
still  the  objection  of  cost.  There  are  no  adequate 
records  as  to  just  how  much  of  the  milk  consumed 
in  New  York  City  is  sold  as  dipped  milk.  But  we 
do  know  that  about  65  per  cent  of  all  the  milk  dis- 
tributed in  New  York  City  is  sold  as  bulk  milk  in 
cans,  a  considerable  portion  of  which  is  retailed  as 
dipped  milk  by  stores.  But  35  per  cent  of  all  the 
milk  consumed  in  New  York  City  is  delivered  in 
bottles.  Distributing  costs  from  the  retail  wagon 
in  New  York  City  reflect  the  higher  cost  due  to 
duplication  of  service. 

The  retail  wagons  in  New  York  City  average 
about  250  quarts  per  wagon  as  compared  with  400 

244 


HOW  SHALL  MILK  BE  DISTRIBUTED 

or  more  in  Philadelphia  and  450  in  Pittsburgh. 
In  Philadelphia,  where  90  per  cent  of  the  milk  is  on 
the  retail  wagon,  the  milk  dealer  delivers  milk 
bottled  and  cooled  to  the  consumer  at  about  the 
same  spread  that  the  consumer  in  New  York  City 
pays  for  dipped  milk  at  the  store.  If  New  York 
dealers  had  90  per  cent  of  the  milk  sold  to  consumers 
on  the  retail  wagon  their  costs  per  bottle  delivered 
would  be  materially  less  than  it  is  and  all  consumers 
could  get  their  milk  delivered  at  a  lower  price  than 
it  now  costs  them. 

The  Mayor's  Committee  in  New  York  City, 
which  reported  in  the  Autumn  of  1917,  stated  that 
if  the  load  on  the  retail  wagon  in  New  York  City 
averaged  428  quarts  (about  the  present  average  in 
Philadelphia)  the  bottled  milk  then  being  sold  in 
New  York  City  (estimated  at  704,318  quarts) 
could  all  be  delivered  on  "2243  retail  wagons 
instead  of  the  4978  actually  in  use  at  the  present 
time.  This  would  mean  only  45.3  per  cent  of  the 
present  number,  or  a  saving  of  54.7  per  cent  of  the 
total/'  But  a  driver  could  not  handle  428  quarts 
on  the  average  unless  he  had  a  relatively  short  haul. 
With  a  larger  portion  of  the  milk  bottled,  more 
could  go  on  the  retail  wagon  and  the  haul  could  be 
shorter.  Hence,  the  cost  of  distribution  of  bottled 
milk  per  quart  could  be  lowered. 

A  quart  milk  bottle  now  costs  a  little  over  five 
cents.  It  should  make  at  least  thirty  trips  in  the 
wagon  trade.  This  is  a  cost  for  the  container  of 
about  one-sixth  of  a  cent  per  quart  per  trip.  Is  it 

245 


THE  PRICE  OF  MILK 

worth  this  to  the  consumer  to  have  the  milk  delivered 
daily  and  regularly  at  the  door  in  good  condition? 
In  addition  to  the  cost  of  the  bottle  is  the  fraction 
of  a  cent  due  to  cleansing  and  sterilizing  milk  bottles, 
putting  stoppers  into  them  and  for  refrigeration  on 
the  retail  wagon.  Is  this  cost  worth  daily  delivery 
to  the  door?  These  same  costs  accrue  to  the  con- 
sumer through  the  retail  stores.  Since  the  grocer's 
costs  and  profits  are  more  than  the  savings  to  the 
milk  dealer  in  quantity  deliveries,  sales  of  bottled 
milk  through  the  grocery  stores  are  more  costly  to 
consumers  than  sales  through  the  retail  wagon. 

The  author  was  called  into  a  Pennsylvania  city 
to  advise  as  to  the  price  of  milk.  The  dealers  were 
insisting  that  the  price  to  the  consumer  would  have 
to  go  to  fifteen  cents  per  quart  for  the  following 
month,  with  the  price  paid  to  the  farmers  remaining 
the  same.  The  reasons  given  by  the  dealers  were 
that  their  bottle,  plant,  wagon,  feed  and  labor  costs 
were  going  up  and  that  they  had  to  have  another 
cent  per  quart  from  the  consumer  to  meet  these 
Arising  costs. 

Milk  was  then  retailing  to  the  consumer  at  14 
cents  per  quart,  bottled  and  pasteurized.  Of  the 
bottled  milk  sold  in  the  city,  60  per  cent  went  to 
the  grocery  stores  at  12  cents  per  quart.  This  milk 
the  grocery  stores  sold  to  the  consumer  at  14  cents 
per  quart.  From  the  retail  wagons  40  per  cent  of 
the  city's  consumption  was  delivered  to  the  door 
at  14  cents  per  quart.  But  one  milk  dealer  in  the 
city  had  cost  records.  From  these  records  and  from 

246 


HOW  SHALL  MILK  BE  DISTRIBUTED 

cost  records  of  dealers  in  other  cities  the  author 
proved  to  the  milk  dealers  that  they  were  actually 
losing  more  money  on  the  60  per  cent  of  the  milk 
delivered  to  grocery  stores  at  12  cents  per  quart, 
in  view  of  the  price  to  the  farmer,  than  they  were 
making  on  the  40  per  cent  of  the  milk  they  sold  to 
consumers  from  retail  wagons  at  14  cents  per  quart. 
He  therefore  suggested  that,  instead  of  raising  the 
price  to  the  grocery  store  to  13  cents  and  to  the 
consumer,  by  grocery  store  and  retail  wagon,  to  15 
cents,  they  lower  the  price  to  the  consumer  to  13  cents 
for  milk  delivered  from  the  retail  wagon  and  charge 
the  grocery  stores  the  same  as  they  charged  the 
consumer.  The  grocery  store  would  then  retail 
milk  as  an  accommodation  at  15  cents  per  quart, 
but  the  greater  percentage  of  consumers  would  buy 
their  milk  delivered  at  their  door  at  13  cents  per 
quart. 

This  policy  was  adopted.  The  results  were:  (1) 
consumers  got  their  milk  at  one  cent  per  quart 
lower  than  they  did  when  more  than  half  of  the 
milk  was  distributed  through  the  grocery  store  and 
less  than  half  through  the  retail  wagon;  (2)  the 
retail  wagons  were  soon  carrying  85  per  cent  of  the 
bottled  milk  in  the  city  at  lower  costs  per  quart 
because  of  larger  loads  and  shorter  hauls;  (3)  the 
milk  dealers  made  a  reasonable  profit  with  milk 
at  13  cents  to  both  consumers  and  grocery  stores, 
when  they  were  losing  money  at  14  cents  to  consumers 
and  12  cents  to  grocery  stores.  Similar  results  have 
been  secured  in  other  cities  under  similar  conditions. 

247 


THE  PRICE  OF  MILK 

Milk  is  most  economically  distributed  through  one 
channel  and  that  channel  is  the  retail  wagon. 

Proposals  as  to  methods  of  milk  distribution  that 
will  revolutionize  existing  methods  must  be  passed 
in  review  only.  One  is  to  have  a  "nickel-in-the-slot 
machine"  in  each  apartment  house  or  drug  store 
for  self  service.  Because  of  refrigeration  and  other 
difficulties  this  method  has,  to  date  at  least,  been 
found  impractical.  Another  proposal  is  to  deliver 
milk  in  paper  containers  sterilized  and  sealed  at  the 
plant,  to  be  opened  by  the  consumer  as  used.  Thus 
far  the  cost  of  this  has  been  prohibitive.  Then 
there  is  the  delightfully  sophomoric  plan  that  the 
public  schools  be  made  the  center  for  milk  distribu- 
tion, whether  by  the  school  teachers  (since  they 
have  so  little  to  do  now)  or  by  society  ladies  (who 
of  course  have  nothing  else  to  do)  or  by  paid  officials, 
doth  not  appear.  A  proposal  that  would  change 
the  whole  industry  (and  it  is  not  without  merit, 
even  though  impractical  under  present  standards 
and  costs)  is  to  have  the  water  extracted  from  the 
milk  in  the  country  and  sell  to  consumers  milk 
remade  in  the  city  by  homogenizing  skim  milk 
solids,  sweet  butter  and  water.  This  remade  milk 
is  discussed  elsewhere.  All  of  these  plans  must 
await  far-reaching  changes  if  they  are  ever  to  be 
both  commercially  successful  and  acceptable  to  the 
public.  And  none  of  them  can  change  the  essential 
question  discussed  in  this  chapter. 

The  argument  in  favor  of  retail  store  distribution 
as  a  policy  is  that  certain  consumers  cannot  afford 

248 


HOW  SHALL  MILK  BE  DISTRIBUTED 

refrigerators  and  therefore  must  use  (and  pay  for) 
the  refrigerator  in  the  grocery  or  drug  store.  The 
answer  to  this  argument  is  that  for  most  of  the  year, 
in  most  of  the  United  States,  milk  can  be  kept  from 
the  morning  delivery  until  supper  without  ice. 
In  the  warm  months  milk  can  be  kept  certainly  for 
two  meals  without  ice.  That  means  that  the 
consumer  without  a  refrigerator  must  go  to  the 
grocery  store  for  the  milk  necessary  for  children, 
for  one  meal  for  the  hot  season  only.  Under  these 
conditions  it  is  cheaper  even  for  the  consumer  to 
have  the  milk  delivered  at  the  door  regularly  and 
use  the  grocery  store  for  the  special  days  and  for 
special  needs.  The  percentage  of  consumers  with- 
out refrigerators  varies  as  between  sections  of  the 
city  and  as  between  races.  But  the  proportion  of 
households  with  refrigerators  is  rapidly  increasing. 
Moreover,  a  canvass  of  wage-earning  sections,  from 
which  one  would  expect  demands  for  a  lower  price 
of  milk  at  the  grocery  store  because  of  a  lack  of 
refrigerators  in  the  homes,  revealed  that  most 
wage-earners  have  refrigerators  and  want  their 
milk  delivered  regularly  at  the  door.  For  the  mother 
in  such  homes  has  plenty  to  do  without  being  her 
own  delivery  boy. 

The  best  policy  for  milk  distribution  is  to  have 
the  milk  delivered,  bottled  and  refrigerated,  at  the 
consumer's  door.  This  means  that  the  price  to  the 
grocery  or  drug  store  should  be  the  same  as  to  the 
consumer  from  the  retail  wagon,  the  grocer  and  the 
druggist  retailing  milk  as  an  accommodation  at  one 

249 


THE  PRICE  OF  MILK 

or  two  cents  per  quart  above  the  price  the  consumer 
pays  for  milk  delivered  at  the  door,  because, 

(1)  The  larger  the  retail  load  and  the  shorter  the 
haul,  the  lower  the  cost  of  delivery  per  quart  from 
the  retail  wagon. 

(2)  By  concentrating  the  handling  and  distribut- 
ing of  milk  with  those  especially  equipped  to  handle 
it  the  costs  per  quart  can  be  lowered  and  the  whole- 
someness  of  the  milk  more  certainly  guaranteed. 

(3)  The  cost  saved  by  delivery  in  quantities  to 
the  grocery  store  is  not  as  large  as  the  grocer's  cost 
of  keeping  and  selling  milk.     In  addition  to  this 
there  is  a  larger  loss  of  bottles  from  the  store  trade. 
Retail  delivery  to  the  consumer  is  therefore  the 
more  economical  method  of  the  two. 

(4)  Milk  is  a  perishable  commodity  and  should 
be    maintained    and    delivered    under    wholesome 
refrigerated  conditions. 

(5)  Dipped  milk  is  more  exposed  to  contamination 
than  bottled  milk  and  the  savings  are  small  as 
compared  with  the  better  quality  and  service  from 
the  retail  wagon. 

(6)  Milk  cows  and  hungry  children  alike  recognize 
no  holidays  and  no  Sundays;  stores  do.    The  advan- 
tage of  the  store  as  a  neighborhood  refrigerator 
has  also  its  limitation:  it  cannot  always  be  open. 

The  best  and  cheapest  channel  for  milk  distribu- 
tion is  the  retail  milk  wagon,  leaving  to  the  retail 
store  such  sales  as  may  prove  worth  while  as  an 
accommodation. 

250 


CHAPTER  XI 
Can  Milk  Distribution  Costs  Be  Lowered 

It  is  pointed  out  on  page  182  that  the  portion  of 
the  consumers'  price  taken  for  a  few  months  after 
the  armistice  by  the  milk  dealers  in  Philadelphia  for 
their  costs  and  profits  was  around  25  per  cent  more 
than  the  portion  needed  for  these  purposes,  on  the 
average,  for  the  fifteen  years  preceding  the  war.  It 
is  there  pointed  out  also  that  the  portion  of  the  cost 
to  the  consumer,  taken  by  the  milk  dealers  serving 
the  consumers  of  New  York  City  for  costs  and 
profits  increased  36.3  per  cent  from  1915  to  1918. 

In  Philadelphia,  before  the  war,  when  milk  was 
selling  at  eight  cents  per  quart,  about  four  cents  of 
the  annual  average  price  per  quart  went  to  the  pro- 
ducer, f.  o.  b.  Philadelphia,  and  four  cents  to  the 
distributor.  This  was  the  situation  in  1914.  By 
1919  the  farmer  was  receiving  nine  cents  per  quart, 
f.  o.  b.  city,  and  the  distributor  five  cents  per  quart 
for  his  services.  The  price  to  the  producer,  that  is, 
had  increased  125  per  cent  while  the  share  taken  by 
the  distributor  had  increased  25  per  cent.  In  other 
words,  out  of  a  six  cent  increase  in  the  price  of  milk 
to  the  consumer  in  Philadelphia  during  the  war 
period,  five  cents  went  to  the  farmer  and  one  cent  to 
the  milk  distributor. 

Throughout  the  war  period  and  since  Philadelphia 
consumers  have  purchased  milk  at  from  one  to  two 

251 


THE  PRICE  OF  MILK 


cents  per  quart  below  the  price  prevailing  in  any 
other  eastern  city  and  at  a  price  as  low  as  in  any 
city  in  the  United  States,  including  those  in  the  corn 
and  wheat  belt  where  the  price  to  the  milk  producer 
has  been  below  that  in  the  Philadelphia  territory. 
This  low  price  to  consumers  was  not  at  the  expense 
of  milk  producers.  For  the  producers  of  milk  in 
this  territory  received  during  this  period  as  high  a 
net  annual  price  as  did  the  milk  producers  in  any 
primary  market  in  the  country.  To  account  for 

ANNUAL  SPBEAD  TO  MILK  DISTRIBUTOR  IN  CLEVELAND,  1914-1919 


1914. 

1915. 

1916. 

1917. 

1918. 

1919. 

Price  per  quart  paid 

producer,  f.  o.  b. 

receiving  station,  3.5 

per  cent  milk  

$0.030813 

$0.030369 

$0.034354 

$0.049237 

$0.066583 

$0.0676 

Price  received  from 

consumer  on  quarts. 

.08 

.08 

.0825 

.1083 

.13» 

.14666 

Spread  retained  by  dis- 

tributor from  coun- 

try to  consumer  

.049187 

.049631 

.048146 

.059063 

.0634167* 

.07906 

Price  per  quart  paid 

to  producer,  f.  o.  b. 

Cleveland  

.0381 

.0380 

.04166 

.0573 

.0775 

....t 

Spread  retained  by  dis- 

tributor from  f.  o.  b. 

city  to  consumer.  .  . 

.0419 

.0420 

.04084 

.0510 

.0525 

....f 

the  favorable  retail  price  in  Philadelphia  one  must 
turn  to  the  efficiency  in  plant  and  delivery  of  the 
Philadelphia  milk  dealers. 

The  Table  above  gives  the  margin  or  spread  for 
expenses  and  profits  in  Cleveland,  Ohio,  for  the  years 


*  These  figures  include  only  the  first  three  months  of  1918. 
f  Not  available  for  1919. 

252 


CAN  MILK  COSTS  BE  LOWERED 


1914  to  1919,  inclusive,  when  measured  (1)  by  the 
difference  between  the  net  price  paid  to  producer!  .o.b. 
country  receiving  station  and  the  price  paid  by  con- 
sumer, and  (2)  by  the  difference  between  the  price 
paid  the  producer  f .  o.  b.  Cleveland  and  the  price 
paid  by  consumer. 

The  average  spread  in  1918  showed  an  increase 
over  that  for  1914  of  about  30  and  40  per  cent 
respectively  from  the  country  receiving  station  and 
from  f.  o.  b.  city  to  consumer.  The  increase  in 
spread  for  1919  from  country  to  consumer  was  56 
per  cent  over  that  of  1914. 

The  portion  taken  per  quart  in  the  city  of  Co- 
lumbus for  distribution  from  f .  o.  b.  city  to  consumer 
increased  60  per  cent  from  1914  to  1919. 

AVERAGE  ANNUAL  SPREAD  TO  MILK  DISTRIBUTOR  IN  THE 
CITY  OF  COLUMBUS,  OHIO,  1914-1919 


1914. 

1915. 

1916. 

1917. 

1918. 

1919. 

Price  per  cwt.  to  producers  for  4  per 

cent  milk,  f  .  o.  b.  Columbus  

$1.88 

$1.82 

$1.90 

$2.52 

$3.42 

$3.81 

Price     received     from     consumer 

on  quarts                      

.08 

.08 

.08 

.0883 

.13 

.1425 

Spread  retained  by  distributors  on 

quarts  retailed  

.0325 

.0375 

.0375 

.04 

.0458 

.0523 

The  chart  on  the  next  page  compares  (1)  the 
relative  increase  in  the  prices  for  all  commodities  in 
the  United  States  with  (2)  the  increase  in  price  to 
the  producer,  (3)  the  increase  in  the  spread  to  the 
milk  distributor,  and  (4)  the  increase  in  price  to  the 

253 


I     li>13'    I     1914      I    1915       i    1916       [1917      |     1916     |     1819      I      1!>20 

iilsiiis  i*  H  sii  si  H  i  *  s*  n  m  ;  j  u  » 


M  I  j  S  I  I  j  5  I  t  4  *  I  M  S 


^TO  PRODUCER 
--••   CONSUMER 
— »  SPREAD 
—ALL  COMMODITIES 


I     1913     1191411913     .1     1916      I     1917     I    1910       I     191P      I     192O     I 


CHART  No.  XVIII. — THE  RELATIVE  INCREASE  IN  THE  PRICE  OF 
ALL  COMMODITIES  IN  THE  UNITED  STATES  AND  THE  INCREASE  IN  THE 
PRICE  OF  MILK  TO  PRODUCERS  AND  TO  CONSUMERS  AND  THE  SPREAD 
TO  DEALERS  IN  THE  PITTSBURGH  DISTRICT,  JANUARY,  1913,  TO 
JUNE,  1920.  JULY,  1913,  TO  JUNE,  1914  =  100. 

254 


CAN  MILK  COSTS  BE  LOWERED 

consumer  from  1913  to  June,  1920,  inclusive,  in  the 
Pittsburgh  district. 

From  July,  1913,  to  June,  1914,  the  price  of  milk 
to  the  consumer  in  Pittsburgh  averaged  9f  cents  per 
quart.  Of  this  amount  4f  cents  went  for  distributing 
costs  from  f.  o.  b.  city  to  consumer,  and  5|  cents 
went  to  the  farmer  and  for  freight  and  country  receiv- 
ing station  charges.  In  1919  the  consumer  paid 
an  average  of  14.7  cents  per  quart.  Of  this  amount 
5.97  cents  per  quart  went  for  distributing  costs  and 
8.73  cents  per  quart  to  the  cost  of  milk  in  the  country 
and  the  cost  of  country  receiving  stations  and  for 
freight.  The  distributing  costs  within  the  city 
during  this  period  increased,  that  is,  about  25  per 
cent,  as  compared  with  an  increase  of  47|  per  cent 
in  the  total  for  milk,  freight  and  receiving  station 
charges.  From  July,  1913,  to  June,  1914,  the  pro- 
ducer at  the  country  receiving  station  received  a 
monthly  average  of  $1.49  per  hundred  weight  for  his 
milk.  During  the  calendar  year  1919  the  producer 
received  an  average  of  $3.26  per  hundred  weight, 
an  increase  of  119  per  cent,  as  compared  with  an 
increase  of  114  per  cent  in  the  general  price  level. 
During  this  period  the  price  to  the  consumer  per 
quart  increased  50  per  cent  as  compared  with  114 
per  cent  for  all  other  commodities.  It  is  thus  seen 
that  the  favorable  price  to  milk  consumers  in  Pitts- 
burgh has  come  through  lower  relative  charges  by 
distributors  both  in  the  country  and  in  the  city. 

In  authorized  statements  shoe  manufacturers  have 
held  that  their  costs,  including  materials,  went  up 

255 


THE  PRICE  OF  MILK 

from  $3.35  in  1914  to  $10.04  in  1919.  Had  the  milk 
dealers  in  Pittsburgh  increased  the  charge  for  their 
services  in  this  same  proportion,  milk  would  have 
sold  at  24  cents  per  quart  when  it  was  selling  at  16 
cents,  keeping  the  same  price  to  the  producer.  Had 
the  price  to  the  milk  producer  and  distributor  both 
gone  up  in  the  same  ratio  as  shoes  the  price  of  milk 
would  have  been  28  cents  per  quart.  Had  the  price 
of  milk  to  the  consumer  increased  in  the  ratio  of 
clothing  prices  from  1913  to  1919  the  price  would 
have  been  34  cents  per  quart  instead  of  16  cents. 

Now  wage  costs  to  these  milk  dealers  increased  as 
rapidly  as  did  wages  in  other  businesses.  The  cost 
of  glass  bottles,  milk  machinery  and  other  materials 
went  up  to  these  milk  dealers  in  the  same  proportion 
that  materials  advanced  in  other  businesses.  The 
prices  on  the  1437  commodities  represented  in  the 
"all  commodity "  curve  in  the  chart  above  increased 
114  per  cent  from  1914  to  1919.  Yet  the  spread 
taken  by  the  dealers  for  costs  and  profits  has 
advanced  in  many  cities,  if  not  in  most  large  Ameri- 
can cities,  from  but  25  to  60  per  cent;  and  more  are 
nearer  the  former  figure  than  the  latter. 

y  is  this  possible?  Only  because  of  the  savings 
due  to  the  tendency  to  do  away  with  duplication  in 
retail  milk  deliveries,  and  because  of  the  economies 
that  have  come  to  the  dealer  through  larger  quantities 
of  milk  handled  at  the  country  receiving  station,  at 
the  city  plant  and  on  the  delivery  wagons.  So  far  as 
low  unit  costs  are  concerned,  the  ideal  is  one  milk 
wagon  on  each  street,  carrying  the  advisable  grades 

256 


CAN  MILK  COSTS  BE  LOWERED 

of  both  raw  and  pasteurized  milk,  handled  through 
plants  of  sufficient  size,  in  relation  to  the  city,  to  give 
minimum  unit  costs  in  cooling,  pasteurizing,  bottling 
and  refrigerating.  This  ideal  has  led  many  a  public 
milk  commission  to  recommend  zoning  of  retail  milk 
wagons  under  public  supervision. 

What  are  the  economies  in  large  scale  handling  of 
milk  and  in  doing  away  with  duplication  of  service 
on  the  streets? 

The  cost  per  quart  for  pasteurizing  milk,  including 
the  investment  for  plant  and  operating  costs, 
decreases  with  increase  in  the  size  of  the  plant  and 
in  the  amount  of  milk  handled;  there  is  also  a 
decrease  per  unit  in  the  cost  of  bottling  milk,  includ- 
ing a  lower  price  for  caps  bought  in  larger  quantities, 
and  in  the  process  of  bottling  itself;  there  are 
economies  in  route  service  certainly  up  to  the  point 
where  the  route  is  as  heavy  as  one  vehicle  can  serve 
in  a  reasonable  drive;  there  are  economies  in  motor 
truck  distribution  from  the  freight  stations  to  the 
plant;  in  the  return  of  milk  cans  from  the  plant  to 
the  station;  and  in  large  scale  buying  and  sterilizing 
of  milk  bottles.  The  cost  of  handling  milk  at  the 
receiving  stations  decreases  per  quart  with  the  quan- 
tity of  business.  Large  scale  distribution  by  a  single 
company  would  eliminate  duplicate  competitive 
advertising.  Laboratory  work  can  be  carried  on 
more  effectively  and  at  less  relative  cost  per  unit 
without  useless  duplication.  There  are  also  savings 
in  overhead  charges,  because  there  are  in  most  cities 
already  at  least  twice  the  investment  in  plants  and 

17  257 


THE  PRICE  OF  MILK 


wagons  necessary  to  handle  well  all  the  milk  delivered 
in  the  city. 

>XMr.  John  R.  Williams,  in  1911,  made  a  study  of 
/   the  money  cost  of  the  duplication  in  milk  distribution 
in  the  City  of  Rochester,  N.  Y.1 

In  one  section  of  the  city  he  found  that  the  27  dis- 
tributors therein  traveled  more  than  20  miles  to 
furnish  273  homes,  whereas  one  dealer  could  render 
the  same  service  by  traveling  not  more  than  2.6 
miles.  He  secured  data  from  173  milk  distributors, 
practically  all  of  the  milk  distributors  in  the  city. 
The  equipment  and  man  power  used  under  the  then 
existing  system  of  milk  distribution  were  compared 
with  the  equipment  and  man  power  essential  under 
a  system  of  non-duplication  as  follows: 


Under  Present  System 

356  men,  and  in  many  cases  their 
families. 

380  horses. 

305  wagons. 

2509  plus  miles  travel. 

$76,600  invested  in  milk-room 
equipment. 

$108,000  invested  in  horses  and 
wagons. 

$2000  present  daily  cost  of  dis- 
tribution. 

$720,000  yearly  cost  of  distribu- 
tion, 


Under  Model  System 
90  men.  1 

50  horses. 

25  horse-drawn  trucks. 

300  miles  travel. 

$75,000  equipment  for  sanitary 
plant. 

$30,750  equipment  of  horses 
and  trucks. 

$600  estimated  daily  cost  of  dis- 
tribution. 

$220,000  estimated  yearly  cost 
of  distribution, 


» Printed    in   the    Transactions    of    the    Fifteenth    International   Congress   on 
Hygiene  and  Demography  held  at  Washington,  D.  C.,  September  23-28,  1912. 

258 


CAN  MILK  COSTS  BE  LOWERED 

Dr.  William's  conclusions  were: 

In  the  foregoing  estimates,  liberal  provision  is 
made  for  amortization,  interest  and  superintend- 
ence. Mention  is  not  made  of  all  the  wastes  that 
could  be  obviated  under  efficient  management, 
and  it  is  believed  that  conclusions  here  presented 
represent  most  conservative  judgment.  There  is 
little  question  that  if  the  milk  supply  of  Rochester 
were  to  be  distributed  by  one  agency,  properly 
organized  and  equipped,  a  saving  to  consumers  of 
at  least  $500,000  yearly  could  be  effected, 

The  Milk  Committee  appointed  by  the  Food 
Controller  for  Canada  to  investigate  milk  supplies 
for  urban  municipalities  concluded  that  unnecessary 
duplication  in  milk  distribution  resulted  in  excess 
costs  over  a  single  zone  delivery  system  of  one- 
fourth  of  a  cent  per  quart  in  plant  costs,  three-fourths 
of  a  cent  per  quart  in  delivery  costs,  and  one- 
fourth  of  a  cent  per  quart  on  bottle  losses.  This 
means  that  the  savings  in  a  single  delivery  system 
would  total  one  and  a  quarter  cents  per  quart. 

The  Dominion  Department  of  Agriculture  esti- 
mates that  the  per  capita  daily  consumption  of  milk 
to  be  one-half  pint  per  day.  The  saving  of  one  cent 
per  quart  on  milk  distribution  in  Canadian  cities 
would  amount  to  $1,500,000  annually.  On  the  com- 
mittee responsible  for  this  estimate  was  John  Bing- 
ham,  the  leading  milk  distributor  of  Ottawa,  Canada, 
and  widely  known  as  an  efficient  business  man. 

The  author,  with  the  cooperation  of  one  of  the 
vigorous  and  effective  county  Food  Administrators 

259 


THE  PRICE  OF  MILK 

of  Pennsylvania,  tried  out  the  economies  in  zoning 
one  of  the  smaller  cities  of  Pennsylvania.  With  the 
routes  zoned  so  that  there  was  but  one  retail  milk 
wagon  on  each  street  in  the  city,  the  dealers  made 
more  money  on  a  spread  of  four  cents  per  quart  than 
they  had  made  previously  on  a  spread  of  five  cents. 
This  saved  the  consumer  one  cent  per  quart. 

In  some  cities  the  direct  savings  by  zoning  milk 
routes  would  not  amount  to  as  much  as  one  cent  per 
quart  at  first,  but  in  any  city  savings  would  amount 
to  at  least  one-half  a  cent  per  quart.  The  amount 
of  the  savings  would  depend  upon  such  factors  as: 
the  extent  of  duplication  in  plant  equipment  and  on 
the  street;  the  load  on  the  retail  wagons;  the  char- 
acter of  the  city's  streets;  the  density  of  the  residence 
districts;  the  topography  of  the  city;  the  managerial 
ability  employed. 

Many  of  the  economies  in  zoning  of  milk  routes  to 
prevent  duplication  will  appear  after,  the  zoning  has 
been  accomplished.  For  instance,  the  loss  on  bottles 
due  to  carelessness  of  consumers  can  be  prevented. 
The  gratuities  now  given  to  keep  a  competitor  out  of 
a  given  apartment  house  or  residence  section  will  be 
avoided.  Capital  will  be  attracted  at  lower  interest 
levels,  because  undue  risks  will  be  done  away  with. 

The  Mayor's  Milk  Committee  of  the  City  of  New 
York,  reported  (1917)  that  the  number  of  retail  and 
wholesale  wagons  used  to  handle  the  milk  supply  of 
New  York  City  was: 

Bottled  milk  supply 704,318  quarts 

Milk  in  cans 896,405  quarts 

260 


CAN  MILK  COSTS  BE  LOWERED 

Retail  wagons 4,978 

Wholesale  wagons 1,522 

Average  load  of  retail  wagons 142  quarts 

Average  load  of  wholesale  wagons 14 . 7  cans 

As  to  the  economies  incident  to  the  elimination  of 
competition  and  the  substitution  of  single-service 
delivery,  this  committee  quotes  with  approval  the 
following  conclusions  of  the  Wicks  Committee 
appointed  by  the  Governor  of  the  State  of  New  York: 

This  business  (milk)  is  conducted  on  an  ex- 
tremely competitive  basis;  ...  a  large  part  of  the 
cost  arises  from  the  bitter  competition  existing  in 
the  distribution  of  the  product.  ...  An  army  of 
solicitors  and  sales  agents  are  maintained.  .  .  . 
Great  and  expensive  organizations  are  maintained. 
.  .  .  Overhead  charges  attributable  to  this  work 
amount  to  an  alarming  sum.  ...  It  is  customary 
to  refer  to  the  fact  that  four  or  six  or  ten  milk 
wagons  and  milk  drivers  visit  the  same  block,  .  .  . 
but  this  ignores  the  really  greater  expense  of  the 
silent  army  of  retainers.  .  .  .  Not  only  do  we 
find  in  single  blocks  these  wagons  and  horses,  but 
on  the  same  block  six  solicitors,  six  route  superin- 
tendents, six  staffs  of  clerks  and  bookkeepers.  .  .  . 
The  distribution  of  milk  is  a  public  service,  which, 
to  be  put  upon  an  economic  basis,  requires  public 
regulation  to  the  end  that  all  unnecessary  services 
even  of  a  competitive  kind  may  be  eliminated, 

Distribution  of  Milk  Should  be  a  Regulated 
Public  Service 

It  is  safe  to  assert  that  the  consumer  in  the  City 
of  New  York  pays  several  millions  of  dollars  an- 
nually for  the  privilege  of  having  all  the  numerous 
261 


THE  PRICE  OF  MILK 

purveyors  of  this  necessity  of  life  engage  in  at- 
tempts to  serve  him.  .  .  . 

It  certainly  seems  as  if  the  dairymen  of  this 
State,  and  the  distributors  with  their  invested 
capital,  and  the  consumer,  should  cooperate  to 
the  end  that  these  unnecessary  competitive 
wastes  be  eliminated.  .  .  . 

The  investigations  of  the  committee  lead  to  the 
conclusion  that  under  the  present  competitive  sys- 
tem it  takes  almost  as  many  men  to  bring  the 
dairymen's  milk  to  the  consumer  as  there  are 
dairymen  engaged  in  the  production  of  milk  with 
all  their  employees.  This  is  the  result  of  the 
purely  competitive  basis  upon  which  the  business 
is  handled.  Three  or  four  milk  stations  are  being 
maintained  with  a  separate  force  of  employees  to 
collect  and  receive  the  dairymen's  milk  at  many 
points  where  one  well-equipped  station  with  a 
competent  force  could  do  all  the  collecting  at  one- 
fifth  the  present  expenses.  This  unnecessary 
duplication  of  service  follows  with  all  its  attendant 
overhead  and  capital  investment  from  the  country 
milk  station  until  the  bottle  of  milk  is  finally  de- 
posited at  the  consumer's  door.  A  large  part  of 
this,  in  the  judgment  of  this  committee,  could 
and  should  be  eliminated.  .  .  .  The  only  solution 
possible  is  to  limit  and  leave  only  those  in  the 
field  which  the  service  actually  requires.  This  is 
just  as  obvious  in  the  case  of  milk  as  it  is  in  gas 
or  any  other  daily  necessity  supplied  in  small 
quantity  to  the  consumer. 

A  milk  dealer  in  a  large  eastern  city  handled,  in 
1917,  1,458,320  pounds  of  milk  in  the  month  of 
lowest  production  and  2,605,931  pounds  in  the 
month  of  highest  production,  with  27  employees  for 

262 


CAN  MILK  COSTS  BE  LOWERED 

the  month  of  lowest  production  and  28  employees  for 
the  months  of  highest  production.  In  other  words, 
nearly  twice  as  many  pounds  of  milk  were  handled 
at  maximum  production  with  the  addition  of  but  one 
employee.  The  next  year,  with  the  same  number  of 
employees,  a  minimum  of  1,747,939  pounds  were 
handled  during  the  month  of  lowest  production  and 
2,823,219  pounds  during  the  month  of  highest  pro- 
duction. That  is,  with  the  same  number  of  em- 
ployees, a  much  larger  amount  of  milk  was  handled  in 
1918  than  in  1917,  and  hence  the  cost  of  handling 
per  quart  was  lower. 

From  the  cost  records  of  a  large  milk  dealer  in  the 
Mississippi  Valley,  the  author  secured  the  following 
facts  as  indicative  of  the  lower  costs  per  quart  when 
volume  increased.  For  the  six  months  ending  Feb- 
ruary 28,  1918,  the  sales  in  dollars  amounted  to 
$642,662.08.  Of  this  amount  $480,214.50,  or  74 
per  cent,  was  paid  for  the  milk  f .  o.  b.  city.  The  sell- 
ing, delivery,  general  and  administrative  expenses  in 
the  city  totaled  $153,151.14,  or  24  per  cent  of  sales. 
For  the  six  months  ending  August  31,  1918,  the 
sales  totaled  $776,040.99,  an  increase  of  21  per 
cent.  The  cost  to  distribute  this  milk  within  the 
city  (selling,  delivery,  general  and  administrative 
expenses)  was  $173,689.87,  or  22  per  cent  of  the 
total  received  for  sales.  That  is,  the  cost  of  dis- 
tribution increased  but  12  per  cent  to  care  for  an 
increase  of  21  per  cent  in  sales.  And  the  costs  of 
labor  and  materials  were  higher  in  the  latter  six 
month  period  than  in  the  former! 

263 


THE  PRICE  OF  MILK 

Into  a  certain  city  in  the  East  the  author  was 
called  by  a  local  food  administrator  because  the  large 
milk  dealers  of  the  city  were  demanding  a  substan- 
tial increase  in  spread  to  offset  what  they  claimed 
was  a  "40  per  cent  increase  in  cost  because  materials 
had  gone  up  50  per  cent  and  labor  30  per  cent/'  An 
examination  showed  these  percentages  as  to  materials 
and  labor  to  be  substantially  correct.  But  it  was 
also  found  that  the  larger  retail  loads  and  better 
utilization  of  plant  equipment  due  to  a  war  popula- 
tion and  to  a  decrease  in  the  number  of  milk  dealers 
in  the  city,  had  more  than  offset  the  increases  in 
material  and  labor  costs  so  that,  on  the  same  spread, 
the  milk  dealers  were  making  a  higher  profit  than 
in  the  year  preceding,  despite  the  fact  that  "materials 
had  gone  up  50  per  cent  and  labor  30  per  cent." 

It  must  be  remembered  that,  as  the  load  "on  the 
retail  wagons  goes  up,  and  the  number  of  milk  drivers 
goes  down  in  proportion  to  the  amount  handled,  the 
number  of  clerical  assistants  needed  may  have  to  go 
up  because  the  clerks  have  not  increased  relatively 
their  output.  For  instance,  one  milk  dealer  in 
November,  1917,  handled  an  average  of  265  quarts  on 
93  retail  routes,  or  24,645  quarts  daily,  with  60 
employees  in  the  plant,  with  15  clerks  in  the  office 
and  with  15  foremen  for  the  93  milk  drivers.  This 
dealer  later  increased  the  quarts  on  the  retail  wagon 
and  decreased  the  number  of  drivers.  By  July  of 
1918  he  was  delivering  347  quarts  on  the  average 
from  89  routes,  or  30,883  quarts  daily,  with  70 
employees  in  the  plant,  14  foremen,  and  with  16 

264 


CAN  MILK  COSTS  BE  LOWERED 

clerks  in  the  office.  There  were  economies  in  plant 
and  retail  equipment.  An  increase  of  20  per  cent  in 
volume  was  handled  by  an  increase  of  16  per  cent  in 
plant  employees  and  7  per  cent  in  the  number  of 
clerks  and  a  decrease  of  one  foreman  and  four  milk 
drivers. 

Mr.  Asa  B.  Gardiner,  a  milk  distributor  of  Balti- 
more, Md.,  writes  the  author  that  a  cost  survey  in 
November  of  1919  of  typical  plants  in  four  cities 
brought  out  this  striking  comparison  on  the  basis  of 
the  quartage  on  the  retail  wagons: 


City. 

Average  Number 
of  Quarts  on 
Retail  Wagons. 

City  Distribution 
Costs  per  Quart 
(cents). 

Ottawa,  Can,  

550 

3H 

Philadelphia  Pa                    .          

410 

4&i 

Baltimore,  Md     

335 

% 

New  York  City                        

240 

7% 

"Obviously,"  concludes  Mr.  Gardiner,  "the  quart- 
age  on  retail  wagons  is  not  the  only  factor  causing 
this  price  variation,  but  it  is  a  substantial  factor." 
The  two  principal  reasons  causing  the  low  retail 
loads  in  New  York  City  (dipped  milk  at  the  stores 
and  limitations  in  load  by  drivers)  are  discussed  in 
Chapter  X. 

Mr.  Gardiner  continues: 

Route  salesmen,  will,  when  properly  encouraged, 

taught   and    trained    to    effective   salesmanship, 

average  willingly  this  high  quartage.     The  labor 

unions  in  New  York  City  restrict  and  limit  the 

265 


THE  PRICE  OF  MILK 

sales  per  route  and  in  other  ways  prevent  their 
own  members  and  the  community  from  enjoying 
the  results  of  higher  route  quartage. 

The  increased  ratio  of  earning  per  quart  or 
gallon  of  milk  is  the  factor  sought.  Increasing 
volume  of  business  by  adding  retail  wagons  with- 
out increasing  quartage  on  present  retail  wagons 
offers  no  immediate  benefit,  the  reason  being  that 
it  requires  a  certain  number  of  quart  sales  to  pay 
its  operating  expenses.  All  additional  quarts  sold 
can  be  considered  net  profit,  less  salesmen's  com- 
missions and  a  slight  allowance  for  use  of  bottles, 
caps,  steam,  etc. 

To  illustrate: 

Average  quarts  per  route 400 

Sales  to  pay  operating  costs 320 

Sales  to  pay  profits 80 

Again: 

Dairy  A  25  routes  average 300  quarts 

Grows  by  increased  quartage  to 350  quarts 

If  in  each  instance  320  quart  sales  were  needed 
to  meet  expenses  then  at  330  quarts,  only  10  quart 
sales  realized  a  very  small  profit  per  wagon,  which 
profit  was,  however,  tripled  when  350  quart  sales 
were  reached. 

Dairy  B  with  25  routes  averaging  330  quarts 
increases  500  quarts  by  putting  on  two  route 
wagons  with  250  quarts  per  day  each.  This  re- 
duced the  route  average  to  324  quarts,  so  that 
only  4  quarts  show  for  profit  and  there  has  been 
made  a  capital  investment  of  the  value  of  the 
two  horses,  harness  and  wagons.  This  dairy  is 
not  now  as  well  off  as  before. 

Any  thinking  man  will  realize  that  no  routes 
should  be  added  until  the  dead  line  of  costs  of 
266 


CAN  MILK  COSTS  BE  LOWERED 


quarts  per  route  was  first  ascertained  and  then 
new  routes  started  only  when  they  promised  soon 
to  pass  this  dead  line  of  costs. 

Milk  drivers  profit  in  wages  by  increasing  their 
retail  loads  when  paid  in  whole  or  in  part  on  a  com- 
mission basis.  This  wage  basis  milk  dealers  are  now 
using  as  a  rule.  Assuming  that  the  total  weekly 
sales  on  four  retail  milk  routes  are  $300,  $350,  $400 
and  $450  respectively,  we  could  get  the  following 
combinations  for  determining  the  weekly  wage  to 
drivers: 


Weekly  rate  to  Drivers  when  Net  Sales  on 

Wage  Basis. 

Retail  Wagons  are 

$300.00 

$350.00 

$400.00 

$450.00 

Commission  only  at  11  per  cent  

$33.00 

$38.50 

$44.00 

$49.50 

$15.00  weekly,  plus  7  per  cent  on  sales  .... 

36.00 

39.50 

43.00 

46.50 

$15.00  weekly,  plus  6  per  cent  on  sales  

33.00 

36.00 

39.00 

42.00 

$20.00  weekly,  plus  5  per  cent  on  sales  

35.00 

37.50 

40.00 

42.50 

$25.00  weekly,  plus  4  per  cent  on  sales  — 

37.00 

39.00 

41.00 

43.00 

Which  of  these  wage  plans  a  driver  would  prefer 
will  depend  on  the  load  on  his  wagon  and  the  average 
time  required  to  retail  that  load.  There  is  greatest 
motive  to  work  when  the  wage  is  based  on  com- 
mission only,  but  the  driver  working  on  this  basis 
may  not,  if  handling  packages  selling  at  different 
prices,  push  the  lower  priced  products  in  a  way 
satisfactory  to  consumers  or  to  the  company.  For 
instance,  if  whole  milk  is  retailing  at  14  cents  per 
quart  and  skim  milk  at  8  cents,  the  driver  working 
solely  on  a  straight  commission  may  soon  get  "out" 

267 


THE  PRICE  OF  MILK 


of  skimmed  milk.  If  all  packages  sold  at  the  same 
price  a  uniform  commission  would  get  uniform 
results.  Where  the  wage  is  partly  a  fixed  sum  and 
partly  a  commission  the  proprietor  can  maintain 
route  and  sales  policies  that  he  cannot  maintain 
when  the  wage  is  on  a  straight  commission.  Differ- 
ent policies  will  suit  different  sections  and  different 
dealers.  These  alternative  wage  schedules  are  cited 
here  as  methods  of  measuring  pay  by  effort  and 
ability,  such  as  can  be  applied  in  other  wage  costs. 


VOLUME    IN 'THOUSAND 


CHART  No.  XIX. — DECLINING  UNIT  COSTS  WITH  INCREASING 

VOLUME  IN  THE  RECEIVING  STATIONS  OP  A  LARGE 

MILK  COMPANY 

The  chart  above  depicts  the  decrease  in  the  unit 
costs  of  handling  milk  in  the  country  receiving  sta- 
tions of  one  company.  The  unit  costs  and  the  vol- 

268 


CAN  MILK  COSTS  BE  LOWERED 

ume  are  for  the  month  of  August,  1919.  Minimum 
unit  costs  are  not  approached  until  the  volume 
reaches  about  250,000  quarts.  Other  factors  affect 
costs  as  well  as  volume.  Those  stations  above  the 
dotted  curve  have  other  costs  such  as  those  inherent 
in  poor  management  that  offset  in  part  the  economies 
in  volume.  The  general  tendency,  however,  is  pro- 
nounced; the  larger  the  volume  the  lower  the  unit  cost. 
The  same  results  are  revealed  in  the  following 
table  giving  the  ratio  of  unit  costs  and  volumes  in 
the  country  receiving  stations  of  a  Philadelphia  milk 
dealer.  The  average  volume  and  the  average  unit 
costs  in  all  stations  are  taken  as  equal  to  100. 

DECLINING  UNIT  COSTS  WITH  INCREASING  VOLUME  IN  TWENTY- 
ONE  RECEIVING  STATIONS  IN  THE  PHILADELPHIA  DISTRICT 


Station  Number. 

1 

2 

3 

4 

5 

6 

7 

8 

9 

10 

11 

Relative  amount  of  milk  handled  .... 

33 

41 

43 

44 

45 

45 

48 

55 

57 

64 

64 

Relative  cost  per  Quart  

178 

137 

140 

89 

80 

122 

102 

116 

79 

76 

100 

Station  Number. 

12 

13 

14 

15 

16 

17 

18 

19 

20 

21 

Relative  amount  of  milk  handled  
Relative  cost  per  quart 

66 
100 

68 
74 

69 
64 

77 
88 

81 
80 

110 
66 

126 
68 

185 
67 

244 
98 

472 
73 

The  cost  of  handling  milk  in  the  receiving  station 
with  472  per  cent  of  the  amount  handled  as  an 
average  in  each  of  the  receiving  stations  was  but 

269 


THE  PRICE   OF  MILK 

73  per  cent  of  the  average  unit  cost  in  all  stations, 
whereas  the  unit  cost  in  the  station  handling  but 
33  per  cent  of  the  average  quantity  handled  by  these 
stations  was  178  per  cent  of  the  average  unit  costs 
in  all  stations.  Here  and  there  are  stations  whose 
unit  costs  are  not  absolutely  in  line  with  this  rule, 
but  an  examination  of  the  cost  records  revealed 
other  cost  factors  at  such  stations  to  be  abnormally 
large. 

The  rule  is  clear  and  important:  Volume  pays  in 
the  country  as  well  as  in  the  city. 

Here  is  a  company  handling  milk  at  its  country 
receiving  stations  in  May  (1919),  when  volume  is 
largest,  at  $0.037  per  quart  as  against  $0.0045  per 
quart  in  September,  when  the  volume  is  not  so  large. 
For  the  same  months  the  costs  of  two  other  com- 
panies are  $0.0033  and  $0.0049  per  quart  in  May  as 
compared  with  $0.0043  and  $0.0061  respectively  in 
September.  The  plant  with  the  larger  volume  has 
substantiaLeconomies  over  the  small  volume  plant. 

The  variations  found  in  unit  costs  between  differ- 
ent dealers  for  the  same  item  reflects  the  possible 
savings  in  sound  management.  One  dealer  bottles 
and  caps  45,000  quarts  of  milk  per  day  with  a  direct 
labor  cost  of  $0.0005  cents  per  quart,  using  6  em- 
ployees for  56|  man-hours,  a  remarkably  low  cost. 
Another  dealer  for  the  same  period  for  exactly  the 
same  service  has  a  direct  labor  cost  for  9000  quarts 
per  day  of  $0.0009,  using  6  employees  for  24  man- 
hours.  This  same  service  for  the  same  period  cost  a 
third  dealer  handling  65,000  quarts  per  day  $0.0012 

270 


CAN  MILK  COSTS  BE  LOWERED 

cents  per  quart,  requiring  20.3  employees  for  192 
man-hours. 

The  very  nature  of  the  product  handled  suggests 
the  need  for  exceptional  abilities  to  get  lowest  pos- 
sible operating  costs.  As  between  plants  there  are 
substantial  cost  differences  in  such  items  as  the 
amount  of  milk  spilled  in  handling;  left  when 
emptying  can  because  the  can  is  not  held  upright 
long  enough;  leakage  in  bottling  or  in  pasteurizing; 
breakage  of  bottles  in  plant;  leaks  in  the  coal  bill 
because  the  heat  is  not  utilized  most  efficiently; 
leaks  in  the  stable  because  the  horses  are  not  fed  a 
balanced  ration;  lost  time  because  platforms  are  not 
placed  well  and  the  retail  wagon  not  just  suited  to 
the  needs;  losses  in  poor  collections;  inadequate 
schooling  of  the  route  salesman  (to  the  consumer 
only  a  milk  wagon  driver) ;  inefficient  labor  because 
proper  motives  are  not  kept  foremost.  The  milk 
industry  is  far  more  complicated  than  the  average 
manufacturing  establishment.  The  skilled  manager 
finds  ample  outlet  for  his  every  ability.  The  in- 
dustry just  now  is  run  in  the  main  by  the  most 
efficient  of  those  who  started  with  one  or  two  milk 
routes  of  their  own.  These  men  have  done  well. 
Every  year  has  seen  new  economies.  The  progress 
made  in  the  milk  industry  in  the  past  decade  reads 
like  a  fairy  tale.  But  there  is  plenty  left  for  the 
skilled  professional  manager  to  accomplish. 

Nor  are  all  the  savings  in  the  plant.  Good  mer- 
chandising counts  for  much.  The  art  of  the  advertis- 
ing that  pays  dividends  in  the  milk  business  is  of 

271 


THE  PRICE  OF  MILK 

recent  growth.  Cordial  relations  with  customers 
pays  in  the  milk  business  as  in  few  businesses.  In 
the  matter  of  returning  milk  bottles  alone,  good  will 
spells  company  success.  With  milk  bottles  at  five 
cents  a  piece,  there  is  a  snug  little  profit  in  just 
getting  consumers  in  the  frame  of  mind  to  set  out 
the  milk  bottles  every  night.  To  get  thirty  trips 
out  of  a  milk  bottle,  as  can  be  done  when  the  con- 
sumer habitually  sets  out  the  bottles,  is  a  profit  of 
one-fifth  of  a  cent  per  bottle  over  an  average  of  but 
twenty  trips  per  bottle,  the  most  that  can  be 
secured  when  the  housewife  is  careless  about  the 
bottles. 

The  loss  on  milk  bottles  is  one  point  on  which  the 
milk  dealer  is  most  often  publicly  criticized.  Con- 
sumers cite  instances  of  scores  of  bottles  in  their 
cellars!  Or  in  dump  heaps!  Or  at  building  opera- 
tions! There  is  often  a  gleeful  assumption  that  the 
dealer  gloats  over  throwing  nickles  away  in  the  form 
of  milk  bottles.  Cannot  something  be  done  about  it? 

Consumers  can  in  numerous  ways  be  taught  the 
monetary  value  of  the  milk  bottle.  Drivers  can  be 
paid  in  proportion  to  bottles  returned.  Experience 
shows,  however,  that  a  commission  to  the  driver 
for  return  of  bottles  too  large  or  a  standard  for 
returns  too  strict  merely  encourages  theft.  A  charge 
can  be  made  for  bottles — if  consumers  and  grocers 
would  only  pay  for  the  charge.  But  neither  likes 
the  idea,  and  the  milk  dealer  soon  learns  to  believe 
that  he  alone  of  all  the  dealers  is  keeping  the  agree- 
ment to  charge  for  bottles. 

272 


CAN   MILK   COSTS  BE  LOWERED 

Commercially,  the  successful  way  to  get  bottles 
back  is  (1)  to  build  up  the  housewifely  habit  of 
setting  the  milk  bottle  out  every  night;  (2)  by  proper 
compensation  to  the  driver  for  collecting  his  bottles; 
and  (3)  an  efficient  bottle  exchange  for  sorting  out 
mixed  lots  of  bottles.  The  Baltimore  Bottle 
Exchange  handled  1,073,253  bottles  in  1916  at  a 
cost  of  $0.009877  per  bottle.  Of  this  number, 
486,000  came  from  dumps  and  588,000  from  other 
dairies.  (4)  Public  health  authorities  can  help  by 
requiring  the  same  name  in  the  bottle  as  on  the  cap — 
thus  doing  away  with  the  motive  for  dealers  to  steal 
each  others  bottles.  This  regulation  saved  6000 
bottles  per  week  to  the  bottle  buying  dairies  in  one 
city  alone.  (5)  Magistrates  can  help  by  inflicting 
real  penalties  on  dealers  using  the  bottles  and  the 
bottle  cases  of  other  dealers.  Low  fines  encourage 
thefts.  (6)  Legislators  can  help  by  making  it  an 
unfair  trade  practice  for  one  dealer  to  use  the  trade- 
marked  bottles  of  another,  and  by  authorizing  the 
proper  authorities  to  revoke  the  license  of  any  dealer 
engaging  in  such  unfair  trade  practices.  (7)  The 
junk  dealer  should  be  prohibited  from  dealing  in 
milk  bottles.  His  trade  is  too  largely  with  thieves. 

Milk  distribution  costs  can  be  and  have  been 
lowered  relatively  for  two  main  reasons:  (1)  The 
business  is  peculiarly  one  in  which  careful  manage- 
ment pays;  (2)  the  business  is  one  of  decreasing  costs: 
added  units  of  capital  and  labor  bring  more  than . 
proportional  increases  in  returns. 

Unit  costs  decrease  as  volume  increases. 

is  273 


CHAPTER  XII 

Public  Interest  in  Milk  Distribution 

Since  milk  contains  certain  elements  essential  to 
sound  nutrition,  not  found  as  cheaply  nor  as  surely 
in  other  foods,  there  is  a  public  interest  in  milk 
distribution  certainly  as  great  as  that  in  the  water 
supply  and  exceeding  the  public  interest  in  gas  and 
electric  companies. 

Water  is  a  necessity  for  the  preservation  of  life; 
milk  is  necessary  for  growth  in  the  young  and  for 
that  sound  nutrition  prerequisite  to  a  happy  and 
fruitful  life.  Water  may  carry  disease;  so  may 
milk.  The  cost  of  the  daily  supply  of  water  deter- 
mines sanitary  and  health  standards  in  the  home; 
the  cost  of  the  daily  supply  of  milk  determines  the 
physical  vigor  of  childhood,  and  hence  the  mental 
vigor  of  middle  life  and  the  contentment  of  old  age. 
Gas  and  electric  prices  form  a  small  part  of  the 
annual  outlay  of  the  average  family  as  compared 
with  the  outlay  for  milk.  While  gas  and  electricity 
are  aids  to  public  welfare  and  add  to  home  conveni- 
ences, yet  neither  is  essential  to  a  normal  physical 
life  as  is  milk.  The  discoveries  of  Dr.  McCollum 
and  his  contemporaries  that  milk  contains  nutrient 
elements  essential  to  health  quite  apart  from  its 
high  food  value,  lends  to  those  who  handle  and  sell 
milk  a  place  of  vital  importance  as  servants  to  the 
physical  well-being  of  their  customers  and  to  the 

274 


PUBLIC  INTEREST  IN  MILK  DISTRIBUTION 

civic  efficiency  of  their  communities.  Through 
these  discoveries  every  milk  distributor  becomes 
in  fact  an  all-important  public  official. 

From  times  immemorial  governments  have  recog- 
nized that  certain  businesses  were  so  essential  to 
public  welfare  as  to  warrant  a  community  regulation 
not  customary  nor,  in  these  later  days  of  constitu- 
tional law,  permissible  as  to  private  businesses.  In 
feudal  days  the  baker,  the  smith,  the  miller  had  to 
serve  all  who  came  (if  they  could  offer  the  hire) 
without  discrimination,  with  adequate  service,  and 
with  just  and  reasonable  rates.  As  commerce 
developed  the  common  carriers  were  held  by  the 
courts  to  be  public  callings  and  to  have  the  same 
common  law  duties.  We  have  from  century  to 
century  changed  the  lists  of  businesses  that  were 
quasi-public,  but  the  distinctions  we  have  alwa^a 
kept. 

At  law  the  quasi-public  businesses  must  serve  all 
who  come,  without  discrimination,  with  adequate 
service  and  at  reasonable  rates.  These  are  common 
law  obligations  and  may  be  enforced  in  the  courts  in 
absence  of  statutory  regulation.  And  government 
may  for  such  quasi-public  businesses — and  does— 
by  statute  (or  more  recently  through  public  service 
commissions)  prescribe  reasonable  rates,  define  what 
constitutes  discrimination,  set  standards  for  service, 
and  lays  down  the  conditions  under  which  service 
may  be  refused.  Milk  distribution  has,  up  to  the 
present  time,  been  regarded  as  a  private  and  not  as 
a  quasi-public  business. 

275 


THE  PRICE  OF  MILK 

All  business,  both  public  and  private,  is  subject  to 
the  state's  general  police  power.  The  state  is, 
however,  limited  in  its  regulation  of  private  business 
under  the  police  power  by  specifying  what  it  may 
not  do.  In  its  regulation  of  quasi-public  business 
it  can  go  farther  and  provide  a  fair  standard  of 
service,  state  the  conditions  under  which  service 
may  be  refused,  prevent  discrimination  in  service 
or  in  rates,  and  fix  reasonable  charges. 

May  milk  distribution  in  the  future  be  regarded 
as  a  quasi-public  business?  Is  the  public  interest 
in  the  product  and  in  the  cost  of  the  service  such  as 
to  put  milk  in  fact  among  the  quasi-public  busi- 
nesses? Is  it  to  the  interest  of  consumers,  milk 
dealers  and  farmers  that  this  be  done? 

What  is  a  private  business  for  one  generation  has 
been  declared  to  be  a  quasi-public  business  for  the 
next.  And  businesses  once  quasi-public  (such  as 
the  miller,  the  smith  and  the  baker)  are  now  held 
to  be  private.  Our  legislatures  may  not  compel 
private  businesses  to  serve  all  who  come  without 
discrimination,  nor  with  adequate  service,  nor  can 
they  fix  the  reasonable  price  at  which  private  business 
may  sell.  But  some  state  legislature  passes  a  law 
regulating  a  given  business  in  one  or  more  of  these 
particulars — a  business  theretofore  held  to  be  pri- 
vate— and  the  courts  must  determine  whether  such 
business  has  already  in  fact  become  quasi-public. 
If  it  has,  such  legislation  is  valid;  if  it  has  not,  such 
legislation  is  invalid.  By  what  tests  does  the  court 
give  answer  to  this  question? 

276 


PUBLIC  INTEREST  IN  MILK  DISTRIBUTION 

The  first  test  is  as  to  whether  the  commodity  or 
service  offered  is  in  fact  a  natural  monopoly.1  On 
the  feudal  estate,  the  miller,  the  baker  and  the 
smith  had  to  serve  all  who  came,  for  there  was  no 
one  else  to  serve  them.  Pack  trains  had  to  carry 
the  goods  offered  at  the  customary  rate  in  early 
England,  because  the  average  merchant  could  not 
afford  a  pack  train  of  sufficient  size  to  be  a  protec- 
tion against  the  robbers  that  frequented  the  high- 
ways. The  ferry  had  to  accept  all  four  of  the 
obligations  named  above  as  peculiar  to  quasi-public 
businesses  at  common  law,  because  the  sites  for 
ferries  were  limited  by  natural  barriers  and  favored 
by  access  to  highways.  Warehouses  were  proclaimed 
to  be  quasi-public,  because  situated  at  the  very 
entrance  to  the  gates  of  commerce.  Municipal 
utilities  are  quasi-public,  because  a  very  limited 
number  of  competing  companies  can  find  room  on  the 
strategic  streets  and  highways.  Water  and  irriga- 
tion companies  are  quasi-public,  because  of  the 
natural  monopoly  of  sources  of  water  supply. 
A  monopoly  or  a  combination  to  restrain  trade 
through  controlling  supply  and  demand  in  com- 
modities or  services  where  there  is  no  natural 
monopoly  does  not  alone  make  a  business  quasi- 
public;  such  a  monopoly  is  subject  to  the  penalties 
prescribed  at  common  and  statutory  law  for  restraint 
of  trade. 

There  is  no  natural  monopoly  as  to  the  supply  of 
milk.  But  good  sites  for  milk  plants  are  as  limited 

i  Y.  B.  39  Hen.  VI,  18,  pi.  24;   Y.  B.  10  Hen.  VII,  8,  pi.  14. 


THE  PRICE  OF  MILK 

as  are  good  sites  for  warehouses.  The  milk  dis- 
tributing plant  must  have  not  only  access  to  the 
carriers  as  must  warehouses,  but  milk  is  perishable 
and  there  must  be  such  a  location  of  the  plant  as  to 
assure  wholesome  water  supply  and  access  to  the 
streets  for  the  retail  milk  wagons.  Therefore,  on 
this  test  alone  milk  distribution  may  be  held  to  be 
in  fact  quasi-public.  The  foregoing  pages  have 
shown  the  economies  due  to  concentration  of  busi- 
ness. To  be  sure,  mere  size  of  business  or  proportion 
of  business  done  by  one  company  are  not  in  them- 
selves final  tests  as  to  whether  a  business  is  either 
quasi-public  or  in  restraint  of  trade.  But  any 
business  subject  to  the  law  of  increasing  returns, 
as  is  the  milk  business  (see  Chapter  XI),  is  poten- 
tially a  monopoly  and  it  is  only  a  question  of  time 
until  it  becomes  a  monopoly  in  fact. 

The  next  theory  applied  by  the  courts  in  deciding 
whether  a  calling  is  quasi-public  is  based  on  legal 
privilege.  Where  a  business  was  created  by  royal 
grant1  or  depended  upon  the  exercise  of  the  right  of 
eminent  domain  there  was  an  obligation  to  the  public 
and  the  business  was  subject  to  regulation.2  Milk 
distribution  has  not  required  the  exercise  of  any 
exclusive  governmental  right  or  privilege,  such  as 
the  power  of  eminent  domain,  and  under  this  theory 
it  cannot  be  regulated.  When  milk  distribution  is 
declared  to  be  in  fact  quasi-public,  the  power  of 
eminent  domain  would  then  flow  to  the  business. 


i  12  East.  527 

•  23  Wall.  108;  160  Fred.  856  (1908). 

278 


PUBLIC  INTEREST  IN  MILK  DISTRIBUTION 

But  natural  monopolies  and  special  privileges  are 
not  the  only  tests  applied  by  the  courts  in  deter- 
mining whether  a  business  is  sufficiently  freighted 
with  the  public  interest  to  be  classified  as  quasi- 
public.  The  courts  extended  the  theory  of  natural 
and  legal  monopolies  by  strained  analogies  until  the 
decision  in  the  case  of  Munn  v.  Illinois  (94  U.  S. 
113,  1876).  An  Illinois  statute  was  sustained  fixing 
the  rate  of  storage  of  grain  in  grain  elevators.  The 
court  followed  the  principle  laid  down  by  Lord  Hale 
"that  when  private  property  is  affected  with  a 
public  interest  it  ceases  to  be  juris  privati  (private 
right)  only/'  One  underlying  principle  for  uphold- 
ing the  fixing  of  these  rates  as  legal  was  the  virtual 
monopoly  held  by  the  grain  elevators  from  their 
geographical  location.  But  the  court  did  not  rely 
upon  this  test.  It  based  its  decision  entirely  upon 
the  existing  need  in  the  public  interest  for  such 
regulation.1 

The  control  exercised  by  common  law  and  statute 
over  quasi-public  business  does  not,  therefore, 
necessarily  depend  upon  the  presence  of  a  natural, 
legal  or  virtual  monopoly  or  geographical  location.2 
The  courts  further  extended  the  tests  in  Brass  v. 
Stoeser  (153  U.  S.  391).  A  North  Dakota  statute 
made  all  buildings,  elevators  and  warehouses,  wher- 
ever located,  used  for  handling  grain  for  profit,  public 
warehouses,  and  fixed  the  rates  for  storage.  The 
court  held  the  statute  constitutional.  In  this  case 


i  This  rule  was  followed  in  People  v.  Budd,  117  N.  Y.  1  (1889). 
247  Kans.  1;  41  Fla.  363. 

279 


THE  PRICE  OF  MILK 

there  was  no  virtual  monopoly  arising  from  geo- 
graphical site,  yet  the  regulation  was  held  to  be 
valid.  The  principle  was  that  certain  business  is 
so  related  to  the  public  interest  that  it  becomes 
subject  to  regulation.  The  decision  was  based 
entirely  upon  the  public  interest  in  the  business. 
Indeed,  the  supreme  court  itself  in  the  later  decision, 
The  German  Alliance  Insurance  Co.  v.  Kansas  (233, 
U.  S.  398),  in  discussing  Brass  v.  Stoeser,  said: 

A  law  of  the  State  of  North  Dakota  was  sus- 
tained which  made  all  buildings,  elevators  and 
warehouses  used  for  the  handling  of  grain  for  a 
profit  public  warehouses,  and  fixed  a  storage  rate. 
The  case  is  important.  It  extended  the  principle 
of  the  other  two  cases  and  denuded  it  of  the  limit- 
ing element  which  was  supposed  to  beset  it — that 
to  justify  regulation  of  a  business  the  business 
must  have  a  monopolistic  character.  That  dis- 
tinction was  pressed  and  answered, 


Is  not  the  cost  of  milk  distribution  equally  of 
public  interest?  Centralized  bottling  and  pasteur- 
izing plants  and  lower  costs  through  the  elimination 
of  duplication  in  service  are  tending,  by  economic 
forces,  to  put  but  few  competing  retail  wagons  on  a 
given  street.  The  service  of  these  wagons  and  the 
prices  charged  are  of  as  much  concern  to  the  con- 
sumer of  milk  as  are  the  rates  charged  for  warehouse 
\^^  capacity  to  the  wheat  growers. 

In  Brass  v.  Stoeser1  the  court  stated  that  the  public 
interest  in  the  business  makes  it  subject  to  regula- 

i  Op.  cit. 

280 


PUBLIC  INTEREST  IN  MILK  DISTRIBUTION 

tion.  This  principle  has  been  further  developed  by 
applying  it  to  the  insurance  case  just  discussed.1 
A  Kansas  statute  providing  for  the  regulation  of 
fire  insurance  rates  was  upheld  as  constitutional. 
The  Supreme  Court  said  that  such  regulation  was 
not  a  violation  of  the  right  of  contract  guaranteed 
by  the  Fourteenth  Amendment  and  did  not  take 
property  without  due  process  of  law.  It  held  that 
the  business  of  insurance  was  so  affected  with  a 
public  interest  as  to  justify  legislative  regulation 
of  its  rates.  ^, 

Are  the  rates  charged  by  milk  distributors  of 
any  less  importance  than  the  rates  charged  by  fire 
insurance  companies?  The  milk  distributor  is  no 
more  readily  accessible  than  the  fire  insurance 
company,  and  milk  is  as  essential  to  the  protection 
of  the  health  as  fire  insurance  is  to  the  protection 
of  property.  The  court  further  held  in  this  case 
that  a  public  interest  can  exist  in  a  business  distinct 
from  a  public  use  of  property. 

There  is  another  similarity  in  principle  between 
the  price  for  milk  by  the  large  milk  distributor  and 
the  rates  for  fire  insurance.  Said  the  court: 

The  price  of  insurance  is  not  fixed  over  the 
counters  of  the  companies  by  what  Adam  Smith 
calls  the  higgling  of  the  market,  but  formed  in  the 
councils  of  the  underwriters,  promulgated  in 
schedules  of  practically  controlling  constancy  which 
the  applicant  for  insurance  is  powerless  to  oppose 
and  which,  therefore,  has  led  to  the  assertion  that 


1  German  Alliance  Insurance  Co.  v.  Kansas,  233  U.  S.  409. 

281 


THE  PRICE  OF  MILK 

the  business  of  insurance  is  of  monopolistic 
character,  and  that  "it  is  illusory  to  speak  of  a 
liberty  of  contract."  It  is  in  the  alternative  pre- 
sented of  accepting  the  rates  of  the  companies  or 
refraining  from  insurance,  business  necessity  impel- 
ling if  not  compelling  it,  that  we  may  discover  the 
inducement  of  the  Kansas  statute,  and  the  problem 
presented  is  whether  the  legislature  could  regard 
it  of  as  much  moment  to  the  public  that  they  who 
seek  insurance  should  no  more  be  constrained  by 
arbitrary  terms  than  they  who  seek  transportation 
by  railroads,  steam  or  street,  or  by  coaches  whose 
itinerary  may  be  only  a  few  city  blocks,  or  who 
seek  the  use  of  grain  elevators,  or  be  secured  in  a 
night's  accomodation  at  a  wayside  inn,  or  in  the 
weight  of  a  five-cent  loaf  of  bread.  We  do  not 
say  this  to  belittle  such  rights  or  to  exaggerate  the 
effect  of  insurance,  but  to  exhibit  the  principle 
which  exists  in  all  and  brings  all  under  the  same 
governmental  power. 

Business  necessity  likewise  requires  identical  prices 
to  consumers  for  similar  standards  of  milk.  A 
profit  of  one-half  a  cent  per  quart  is  good  profit  for 
a  company  handling  a  large  volume  of  milk.  But 
from  a  business  point  of  view  it  is  difficult  and 
costly  to  collect  a  half  cent  even  from  credit  cus- 
tomers. The  milk  is  left  at  the  door  step  before 
the  customer  is  up  in  the  morning.  The  "higgling" 
of  the  market  is  necessarily  absent.  The  customer 
must  rely  on  the  desire  of  some  one  competitor  to 
get  the  trade  by  cutting  prices.  This  practice 
results  in  all  cutting  to  the  same  level  or  in  the  one 
company  driving  others  out  of  business.  The 

282 


PUBLIC  INTEREST  IN   MILK  DISTRIBUTION 

consumer  must  accept  the  price  as  given  by  the 
companies  or  go  without  milk.  And  it  is  not  in 
the  interest  of  the  public  welfare  that  this  be  done 
without  a  review  in  public  tribunals  as  to  the  fair- 
ness of  this  price. 

The  courts  have  answered  the  querulous  objection 
to  these  principles  to  the  effect  that  all  business 
will  be  regulated  if  there  is  any  extension  of  businesses 
that  are  quasi-public.  These  principles  are  not 
general  and  loose,  allowing  any  business  to  be 
brought  under  them.  In  the  dissenting  opinion  in 
the  German  Alliance  Insurance  Case,  Justice  Lamar 
gives  the  following  list  of  quasi-public  occupations: 

Canals,  waterways  and  booms;  bridges  and 
ferries;  wharves,  docks,  elevators  and  stockyards; 
telegraph,  telephone,  electric,  gas  and  oil  lines; 
turnpikes,  railroads,  and  the  various  forms  of  com- 
mon carriers,  including  express  and  cabs.  To  this 
should  be  added  the  case  of  the  innkeeper  (as  to 
which  no  American  case  has  been  found  where  the 
constitutional  question  as  to  the  rights  to  fix  his 
rates  has  been  considered),  the  confessedly  close 
case  of  the  irrigation  ditches  for  distributing  water 
(189  U.  S.  439),  and  the  toll  mill  acts, 

To  this  list  the  court  in  this  case  added  insurance 
companies. 

An  examination  of  these  occupations  will  indicate 
that  fundamentally  the  tests  are: 

The  service  or  commodity  is  (1)  essential  to  equal 
access  by  the  public,  such  as  water  companies,  cabs, 
inns,  transmission  of  intelligence,  insurance,  turn- 
pikes; or  (2)  essential  to  equal  access  by  private 

283 


THE  PRICE  OF  MILK 

businesses  in  order  to  keep  competition  on  a  practi- 
cal basis,  such  as  canals,  waterways,  railways, 
warehouses,  stockyards  and  irrigation  ditches. 

These  tests  the  Supreme  Court  stated  as  follows 
in  the  German  Alliance  Insurance  Case: 

We  have  shown  that  the  business  of  insurance 
has  very  definite  characteristics  with  a  reach  of 
influence  and  consequence  beyond  and  different 
from  that  of  the  ordinary  business  of  the  com- 
mercial world  to  pursue  which  a  greater  liberty 
may  be  asserted.  The  transactions  of  the  latter 
are  independent  and  individual,  terminating  in 
their  effect  with  the  instances.  The  contracts  of 
insurance  may  be  said  to  be  interdependent.  They 
cannot  be  regarded  singly  or  isolatedly,  and  the 
effect  of  their  relation  is  to  create*  a  fund  of  assur- 
ance and  credit,  the  companies  becoming  the 
depositories  of  the  money  of  the  insured,  possessing 
great  power  thereby  and  charged  with  great 
responsibility.  How  necessary  their  solvency  is, 
is  manifest.  On  the  other  hand  to  the  insured 
insurance  is  an  asset,  a  basis  of  credit.  It  is 
practically  a  necessity  to  business  activity  and 
enterprise.  It  is,  therefore,  essentially  different 
from  ordinary  commercial  transactions,  and,  as  we 
have  seen,  according  to  the  sense  of  the  world  from 
the  earliest  times — certainly  the  sense  of  the 
modern  world — is  of  the  greatest  public  concern. 
It  is,  therefore,  within  the  principle  we  have  an- 
nounced. 

The  common  law  obligations  that  attach  to  every 
quasi-public  business  is  not  only  that  their  charges 
shall  be  reasonable,  but  that  they  shall  serve  all 
who  come  without  discrimination  and  with  adequate 

284 


PUBLIC  INTEREST  IN  MILK  DISTRIBUTION 

service.  When  it  is  essential  to  the  public  welfare 
that  a  given  service  or  commodity  be  thus  of  equal 
access  to  all,  the  courts  declare  it  to  be  in  fact  quasi- 
public  and  when  the  court  finds  a  business  to  be  in 
fact  quasi-public  all  these  duties  and  obligations 
attach  thereto  immediately.  It  is  essential  under 
present-day  conditions,  for  reasons  stated  in  Chapter 
VI,  that  milk  producers  around  a  given  receiving 
station  should  all  have  equal  access  to  that  station; 
and  it  is  essential  that  consumers  should  have 
protection  both  as  to  service  and  as  to  prices. 

The  principles  themselves  also  do  away  with  the 
objection  that  government  cannot  wisely  fix  or 
control  prices.  This  government  can  and  does  do 
when  there  is  a  virtual  monopoly  in  buying,  trans- 
porting or  selling.  And  such  now  exists  in  fact 
with  milk  distributing  companies;  certainly  with 
those  in  large  cities. 

If  there  be  doubt  as  to  whether  milk  distribution 
is  now  in  fact  a  quasi-public  business  there  can  be 
no  controversy  as  to  what  follows  such  character 
if  it  be  established. 

If  milk  distribution  should  be  declared  a  quasi- 
public  business  the  following  are  among  the  elements 
in  a  program  for  public  regulation  that  could  be 
adopted  by  any  state: 

1.  A  state  milk  commission  could  be  created  to 
regulate  individuals  and  companies  engaged  in  milk 
distribution  to  the  end  that  they  should  serve  all 
who  came  for  reasonable  rates,  with  adequate  service 
and  without  discrimination. 

285 


THE  PRICE  OF  MILK 

2.  A  consolidation  of  milk  distributing  routes  and 
plants  could  be  authorized  in  order  to  lower  costs, 
and  hence  prices  to  consumers  for  the  same  price 
to  the  producer. 

3.  A  certificate  of  public  convenience  and  neces- 
sity could  be  required  for  any  individual  or  company 
to   enter   into   the   milk   distributing   business   or 
extend  routes  beyond  the  territorial  limits  occupied 
on  the  date  the  law  takes  effect  in  order  to  protect 
investments  subject  to  regulation  of  prices. 

4.  Grades  of  milk  could  be  established  and  enforced 
for  the  protection  of  health  and  for  the  assurance 
of  a  fair  price. 

5.  Standards  of  service  in  the  delivery  of  milk 
could  be  enforced  to  prevent  discrimination. 

6.  Uniform  accounting  systems  could  be  installed 
and  periodic  reports  required  in  order  that  fair 
charges  for  milk  distribution  could  be  assured. 

7.  The    commission    could    be   given   power   to 
subpoena  books,  records  and  witnesses,  to  examine 
which  it  should  have  the  funds  necessary  for  the 
employment  of  competent  assistance. 

8.  Milk  distributors  could  be  required  to  take 
out  licenses  and    the    commission  empowered  to 
revoke  licenses  for  due  cause  after  due  notice  and 
public  hearing. 

9.  Unfair  trade  practice  such  as  doing  business 
with  the  milk  cans  belonging  to  farmers  or  the  cans 
or  bottles  of  other  dealers  could  be  prevented. 

The  advantages  to  the  consumer  of  such  a  program 
would  be:    unnecessary  duplication  of  investment 

286 


PUBLIC  INTEREST  IN  MILK  DISTRIBUTION 

and  of  service  would  be  eliminated  and  milk  dis- 
tribution costs  could  be  lowered  accordingly;  all 
the  economies  listed  in  the  preceding  chapter  result- 
ing from  zoning  milk  routes  would  be  available  to 
lower  distributing  costs;  the  wholesomeness  of  the 
milk  supply  could  be  more  surely  guarded  at  mini- 
mum costs;  fair  standards  of  service  and  proper 
grades  of  raw  and  pasteurized  milk  could  be  assured. 

The  advantages  to  the  milk  distributor  would  be: 
investments  would  be  protected  in  fact  and  in  law; 
a  fair  return  on  the  fair  value  of  the  property  would 
be  assured.  Whether  the  "fair  value "  and  the 
"rate  of  return"  allowed  by  the  commission  would 
be  as  large  as  the  capitalization  and  return  thereon 
possible  without  regulation  is  a  question  in  the  minds 
of  many  milk  dealers.  But  certainly  the  tests 
applied  as  to  what  constitute  fair  values  and  a  fair 
return  are  such  as  are  fair  to  a  conservative  judiciary, 
and  in  the  long  run  must  be  comparable  to  results 
under  real  competition;  for  capital  must  not  only 
be  kept  in  the  business  but  attracted  to  it.  And  if 
there  is  no  real  competition  it  is  high  time  regulation 
be  provided  in  the  public  interest. 

To  the  producer  the  advantages  would  be:  (1) 
Access  through  public  officials  to  all  the  facts  as  to 
receiving  station  and  distributing  costs  of  the  milk 
distributor  to  whom  his  milk  is  sold  in  order  to 
assure  a  fair  judgment  as  to  what  costs  should  be 
deducted  from  the  consumer's  price  for  these  serv- 
ices. The  price  to  the  farmer  is  the  price  to  the 
consumer  less  these  costs  and  hence  the  farmers' 

287 


THE  PRICE  OF  MILK 

market  is  widened  as  the  costs  between  him  and  the 
consumer  are  lowered.  (2)  The  increase  in  the 
consumption  of  whole  milk,  due  to  the  satisfaction 
that  tends  to  follow  public  assurance  that  a  price 
is  fair,  will  tend  to  react  favorably  on  the  price  of 
milk  going  into  manufactured  products.  (3)  These 
results  will  be  secured  in  large  part  if  only  there  be 
assurance  that  these  costs  are  fair  even  though  they 
are  not  lowered.  For  public  confidence  is  an  asset 
of  first  importance  to  every  business  that  needs  a 
widening  market. 

By  no  test  can  milk  production  be  legally  regarded 
as  quasi-public  business  and  hence  prices  to  pro- 
ducers can  not  constitutionally  be  "  fixed  "  by  statute 
nor  by  commission.  Provision  can  be  made  for  the 
arbitration  of  such  prices.  The  only  compulsion, 
however,  can  be  publicity.  The  providing  of  such 
machinery  has  created  public  confidence  and  thus 
bettered  and  extended  the  market  for  both  dealer 
and  farmer  while  assuring  a  fair  price  to  the  con- 
sumer. Where  collective  bargaining  is  in  force  such 
arbitration  machinery  is  advisable. 

Certainly  the  law  and  the  facts  warrant  this 
conclusion:  There  will  be  in  time  a  sustained  demand 
for  public  regulation  of  the  charges  and  services  of 
milk  distributing  companies  that  will  find  fruition  in 
law  unless  milk  distributes  place  and  keep  their 
businesses  on  a  high  ethical  plane,  with  a  high  regard 
for  the  public  interest  in  fair  charges  for  their  services. 
In  more  than  one  state  such  laws  have  already  been 
submitted  to  the  legislators.  If  milk  dealers  will 

288 


PUBLIC  INTEREST  IN   MILK  DISTRIBUTION 

keep  their  relations  to  the  public  on  a  high  ethical 
plane,  refrain  from  taking  all  the  traffic  will  bear 
just  because  they  may  be  in  a  position  to  get  it, 
prefer  conservative  annual  profits  and  returns  to 
exorbitant  profits  and  over-capitalizations,  the  day 
of  regulation  of  milk  distribution  in  the  public 
interest  may  never  come.  But  if  this  business 
becomes  one  in  which  professional  promoters  exploit 
consumers  for  personal  profits  and  greed  is  unre- 
strained public  regulation  is  both  inevitable  and 
advisable.  The  author  should  say  that  he  finds  a 
high  regard  for  the  public  interest  to  be  innate  in 
the  rank  and  file  of  milk  distributors.  This  attitude 
of  fairness  to  the  public  is  native  just  because  the 
demand  for  milk  is  so  sensitive  to  the  attitude  of 
mind  of  the  consumer.  Good  will  is  the  best  asset  of 
the  milk  distributor. 

There  are  certain  policies  which  milk  distributors 
can  adopt  voluntarily  that  will  go  far  toward 
securing  to  all  parties  at  interest  some  of  the  advan- 
ages  flowing  from  that  concentration  of  business 
essential  to  minimum  costs,  with  a  fair  regard  to 
the  public  interest.  These  are: 

1.  To  so  locate  and  maintain  receiving  stations 
as  to  get  and  keep  a  quantity  of  milk  sufficient  to 
assure  minimum  costs.     Unnecessary  duplication  of 
investment  is  as  inadvisable  in  the  country  as  in  the 
city.    The  volume  will  also  depend  upon  the  roads 
and  hauling  distance  of  producers. 

2.  To  raise  the  standard  of  competition  on  the 
street  by  agreeing  as  to  a  minimum  amount  of  milk 

w  289 


THE  PRICE  OF  MILK 

to  be  carried  on  any  retail  wagon  and  as  an  average 
on  all  retail  wagons.  This  will  put  competition  on  a 
paying  basis,  give  to  all  a  share  in  the  economies  of 
larger  loads  and  shorter  hauls,  and  hence  lower  the 
cost  of  distribution. 

3.  By   cooperation   and   consolidation   to   scrap 
receiving  stations  with  capacity  too  low  or  with 
equipment  too  antiquated  for  economical  operation, 
and  to  get  the  volume  in  well-located  modern  plants 
sufficient  to  assure  minimum  costs  with  fair  con- 
sideration of  the  convenience  of  producers. 

4.  To  do  away  through  bottle  exchanges  with 
many  unfair  trade  practices  such  as  doing  business 
with  the  cans,  bottles,  cases  or  other  property  of 
farmers   or   dealers.      Such   cooperation  must  be 
aided   by   proper   ordinances   or   statutes   affixing 
penalties  for  the  larceny  of  such  properties. 

5.  To  keep  the  retail  wagon  the  main  agency  for 
distributing  milk. 

6.  To  maintain  faithfully  high  sanitary  standards. 

7.  To  keep  the  business  on  a  sound  investment 
basis,  shorn  of  speculation. 

8.  To  accept  the  principle  of  conservative,  because 
assured,  profits. 

Under  competition  the  savings  on  such  policies 
will  in  part  at  least  be  shared  with  the  producer  or 
consumer  or  both. 

The  public  is  interested  and  will  ever  vigorously 
interest  itself  in  the  policies  of  milk  distributors  and 
in  the  costs  of  milk  distribution. 


290 


PART  III 


Fair  Price  Policies 


CHAPTER  XIII 
The  Food  Value  of  Wholesome  Milk 

Not  so  many  years  ago  the  relative  values  of  foods 
were  determined  so  far  as  they  were  determined 
scientifically  by  chemical  analysis.  Protein,  energy 
value  and  digestability  were  assumed  to  be  the  sole 
tests  of  the  value  of  a  food.  As  fats,  mineral  salts, 
proteins  and  carbohydrates  were  the  essential  con- 
stituents of  the  normal  diet,  the  nutrition  expert 
rested  his  investigations  with  an  analysis  of  the 
relative  proportion  and  character  of  these  elements 
in  the  respective  foods. 

The  facts  thus  discovered  were  and  are  of  ines- 
timable value.  But  it  remained  for  a  new  school  of 
research  students,  of  which"  Professor  E.  V.McCollum 
of  Johns  Hopkins  may  be  called  the  dean,  to  find 
out,  through  experimental  methods  that  there  are 
certain  other  elements  essential  to  sound  nutrition, 
not  found  in  all  foods,  but  found  only  in  milk  and 
leafy  vegetables,  but  most  surely  and  abundantly  in 
milk. 

Just  what  these  substances  are  is  not  known. 
Funk1  suggested  that  they  be  called  vitamines.  But 
inasmuch  as  in  organic  chemistry  the  words  ending 
in  "amine"  apply  only  to  subjects  containing  nitro- 
gen, this  word  is  not  applicable  to  the  substances  in 
question.  It  is  certain  that  at  least  the  substance 

i  Funk,  C.  J.,  State  Med.,  1912,  xx,  341. 

293 


THE  PRICE  OF  MILK 

found  in  butter  does  not  contain  nitrogen.  Messrs. 
McCollum  and  Kennedy1  have  proposed  that  these 
elements  be  referred  to  as  "Fat-soluble  A"  and 
"Water-soluble  B." 

Fat-soluble  A  prevents  the  development  of  a 
pathological  condition  of  the  eyes.  Water-soluble 
B  prevents  the  development  of  beri-beri,  a  fatal 
form  of  paralysis  prevalent  among  rice-eating  peoples. 
Moreover,  Professor  McCollum  points  out  that 
"what  we  designate  by  each  of  these  terms  is  in 
reality  but  a  single  physiologically  indispensable 
substance,  and  not  a  group  of  substances/'2 

It  is  not  possible  to  secure  appreciable  growth  in 
young  animals  fed  exclusively  as  the  sole  source  of 
nutriment  upon  seed  products,  such  as  wheat,  corn, 
rice,  rolled  oats,  rye,  barley,  kaffir  corn,  millet  seed, 
flax  seed,  pea  and  both  the  navy  and  soy  bean.3  A 
cow,  for  instance,  will  not  thrive  on  corn  alone,  but 
it  will  thrive,  give  an  abundance  of  milk  and  pro- 
duce vigorous  offspring,  on  a  food  mixture  consisting 
of  all  the  parts  of  the  corn  plant,  including  the  leaf 
and  the  straw  as  well  as  the  seed.  It  has  not  been 
possible  to  prepare  a  ration  that  will  induce  good 
nutrition  in  animals  solely  from  wheat  products. 
The  potato  is  to  be  classed  with  the  seeds  in  its 
dietary  properties,  especially  when  pared  in  the 


i  Jour.  Biol.  Chem.,  1916,  XXIV,  431. 

« McCollum,  E.  V.,  "The  Newer  Knowledge  of  Nutrition"  MacMillan,  1919,  p. 
32.  This  is  by  all  odds  the  best  book  on  the  subject.  This  book  and  "  The 
American  Home  Diet"  by  E.  V.  McCollum  and  Nina  Simmonds,  1920,  should  be 
in  every  public  library. 

•  Ibid.,  p.  38. 

294 


FOOD  VALUE  OF  WHOLESOME  MILK 

ordinary  way.  In  the  cellular  layer  just  underneath 
the  thin  paper-like  skin  of  the  potato  is  relatively 
more  of  the  fat-soluble  A.  The  roots  which  we  use 
as  foods  contain  this  substance  but  not  in  the 
degree  which  milk  does.  The  dietary  properties  of 
meats  are  comparable  with  the  seed  foods  rather  than 
with  the  leafy  foods.  .  .  .  With  the  exception  of 
milk,  the  foods  of  animal  origin  do  not  supplement 
completely  the  dietary  deficiencies  of  the  seeds  and 
their  products.1 

Says  Professor  McCollum:1 

(1)  Seed  mixtures,  no  matter  how  complex  or 
from  what  seeds  they  are  derived  will  never  induce 
optimum  nutrition. 

Seeds  with  tubers,  or  seeds  with  tubers,  roots 
and  meat  (muscle),  will  in  all  cases  fail  to  even 
approximate  the  optimum  in  the  nutrition  of  an 
animal  during  growth. 

(2)  The  only  successful  combinations  of  natural 
foods  or  milled  products  for  the  nutrition  of  an 
animal  are: 

(a)  Combinations  of  seeds,  or  other  milled 
products,  tubers  and  roots,  either  singly  or  col- 
lectively taken  with  sufficient  amounts  of  the 
leaves  of  plants. 

(6)  Combinations  of  the  food  stuffs  enumer- 
ated under  (a)  taken  along  with  a  sufficient 
amount  of  milk  to  make  good  their  deficiencies. 

Milk  and  the  leaves  of  plants  are  to  be  regarded 
as  protective  foods  and  should  never  be  omitted 
from  the  diet.  Milk  is  a  better  protective  food 

i  Ibid.,  p.  81. 

295 


THE  PRICE  OF  MILK 

than  are  the  leaves  when  used  in  appropriate 
amounts. 

Again  he  says: 

It  is  unwise  to  approach  very  closely  the  physi- 
ological minimum  with  respect  to  any  dietary 
factor.  Liberal  consumption  of  all  of  the  essential 
constituents  of  a  normal  diet,  prompt  digestion 
and  absorption  and  prompt  evacuation  of  the  un- 
digested residue  from  the  intestine  before  extensive 
absorption  of  products  of  bacterial  decomposition 
of  proteins  can  take  place,  are  the  optimum  con- 
ditions for  the  maintenance  of  vigor  and  the 
characteristics  of  youth.  Such  a  dietary  regime 
can  be  attained  only  by  supplementing  the  seed 
products,  tubers,  roots  and  meat,  which  must 
constitute  the  bulk  of  the  diet  of  man,  with  the 
protective  foods — milk  and  the  leafy  vegetables.1 

The  Professor's  conclusions  as  to  the  value  of  milk 
as  a  protective  food  compared  with  the  leafy 
vegetables  are: 

Milk  is,  however,  without  doubt,  our  most  im- 
portant foodstuff.  This  is  true,  because  the 
composition  of  milk  is  such  that  when  used  in 
combination  with  other  foodstuffs  of  either  animal 
or  vegetable  origin,  it  corrects  their  dietary  de- 
ficiencies. Combinations  of  equal  weights  of  milk 
and  one  of  the  cereal  grains  give  excellent  results  in 
the  nutrition  of  animals  during  growth,  and  grain 
mixtures  supplemented  with  milk  support  well  in 
adult  life  the  function  of  reproduction  and  rearing 
of  young.  This  is  because  of  the  excellent  quality 
of  its  proteins,  the  peculiar  composition  of  its 

1  Ibid.,  p.  148. 

296 


FOOD  VALUE  OF  WHOLESOME  MILK 

inorganic  content  and  the  remarkable  content  of 
the  dietary  essential,  fat-soluble  A,  in  the  fats  of 
milk.  Milk,  like  nearly  all  of  the  other  natural 
foods,  contains  a  great  abundance  of  the  second 
dietary  essential  of  unknown  chemical  nature, 
water-soluble  B. 

The  conclusions  from  the  above  are  that  milk  is 
so  constituted  as  to  be  priceless  as  a  supplementary 
food  to  make  good  the  deficiencies  of  the  tubers, 
seeds,  and  muscle  meats.  The  only  other  foods 
which  can  more  or  less  take  its  place  are  eggs,  the 
leaves  of  plants  and  the  .glandular  organs,  such  as 
liver.  In  price  these  special  nutrient  elements  are 
found  most  cheaply  and  most  abundantly  in  milk. 
Yet  milk  also  compares  well  with  other  foods  in  price 
for  its  protein  and  energy  content.  By  these  tests, 
milk,  while  not  the  cheapest,  is  one  of  the  cheapest 
and  is  the  most  needed  of  all  foods. 

Dr.  Dorothy  R.  Mendenhall,  in  a  bulletin  in  the 
Care  of  Children  Series1  issued  by  the  United  States 
Department  of  Labor,  declares  milk  to  be  the  indis- 
pensable food.  She  says: 

Milk  is  often  stated  to  be  a  perfect  food.  By 
this  we  mean  that  it  contains  all  the  essential  ele-! 
ments  for  normal  human  growth  and  development. 

The  adequacy  of  a  food  or  diet  depends  briefly 
on  its  containing: 

1.  Enough  of  the  right  sort  of  material  to  build 
up  and  repair  the  living  tissues  of  the  body.  These 
body-building  substances  in  the  food  are  called 
proteins,  and  are  found  especially  in  milk,  meat, 


1  No.  4.     United  States  Department  of  Labor,  1918. 

297 


THE  PRICE  OF  MILK 

fish,  eggs,  and  in  certain  vegetables,  especially 
beans  and  peas. 

2.  Enough  substances  to  furnish  the  required 
energy  of  the  body.    Fats,  starches  and  sugars  are 
the  chief  energy  foods,  and  are  transformed  in  the 
body  into  energy  for  work  and  into  body  heat. 

3.  A  variety  of  mineral  substances,  which  are 
needed  in  the  growth  and  functioning  of  the  parts 
of  the  body,  such  as  the  skeleton,  the  brain,  the 
blood,  etc. 

4.  An  adequate  amount  of  certain  substances 
whose  nature  is  not  yet  fully  known  but  whose 
presence  in  the  diet  has  been  demonstrated  to 
affect  body  growth  in  animals  or  man.     These 
substances,  known  as  vitamines,  growth  deter- 
minants,  or  the  unknown   dietary  factors,   are 
therefore  essential  elements  in  our  food. 

5.  No  substance  poisonous  to  the  average  in- 
dividual nor  one  which  will  not  allow  of  normal 
digestive  processes. 

In  addition,  to  be  properly  digested  and  of  the 
utmost  nutritive  value,  articles  of  diet  must  also 
be  of  pleasing  taste,  palatable  and  preferably  of  a 
consistency  and  appearance  similar  to  the  foods 
in  customary  use  by  the  race. 

Clean  milk  fulfils  all  of  these  requirements  for 
an  adequate  food  better  than  any  other  single 
foodstuff. 

Milk  is,  then,  in  a  sense,  a  complete  food;  if 
used  as  the  sole  food  it  will  sustain  life  and  allow 
growth.  It  is  used  as  an  exclusive  diet  for  young 
children,  but  after  infancy  supplementary  foods 
need  to  be  included  in  the  diet  for  the  best  develop- 
ment. For  one  reason,  milk — which,  in  respect  to 
all  its  ingredients,  ranks  among  the  most  digestible 
of  animal  foods — is  so  completely  digested  that 
298 


FOOD  VALUE  OF  WHOLESOME  MILK 

there  is  practically  no  waste.  Though  this  com- 
plete digestibility  renders  milk  one  of  the  most 
efficient  foodstuffs,  a  certain  amount  of  non- 
digestible  material  in  the  food — so-called  roughage 
— is  necessary  to  regulate  the  discharges  from  the 
digestive  tract.  For  this  reason,  and  for  several 
others,  a  mixed  diet  after  the  first  year  of  life  is 
better  than  an  exclusive  milk  diet. 

Unfortunately  cows'  milk  is  low  in  iron  content, 
even  as  compared  with  human  milk,  and  this 
important  mineral  must  be  supplied  in  other  foods. 
The  prolonged  exclusive  use  of  milk  after  early 
infancy  tends  to  produce  an  anemia  from  lack  of 
iron  in  the  blood.  Iron  can  best  be  introduced 
into  the  diet  through  the  early  use  of  fruit,  vege- 
tables, and  whole  cereals. 

The  abundance,  character  and  digestibility  of 
its  proteins  and  its  large  mineral  content  make 
milk,  as  we  have  shown,  a  most  desirable  food; 
but,  after  all,  the  most  valuable  properties  of  milk 
lie  in  its  containing  an  abundance  of  the  unknown 
dietary  factors — the  vitamines  which  control 
growth  and  health.  One  such  substance  is  found 
chiefly  in  milk  fat  and  the  organic  fat  of  certain 
other  animals,  but  is  not  present  in  vegetable  oils 
or  in  pork  fat.  Eggs  and  green  vegetables,  such  as 
spinach  and  chard,  do  contain  appreciable  amounts 
of  this  vitamine,  but  milk  is  our  chief  source.  The 
cream  of  a  quart  of  milk  contains  as  much  of  this 
vital  substance  as  is  found  in  all  the  skim  milk 
left  after  the  cream  is  removed.  A  second  recog- 
nized vitamine  is  present  in  all  foods  consumed  in 
their  natural  state  and  in  sufficient  abundance  to 
maintain  health.  In  the  manufacturing  of  purified 
foodstuffs,  such  as  the  polishing  of  rice  or  in  the 
milling  of  flour,  this  substance  may  be  lost,  and  a 
299 


THE  PRICE  OF  MILK 

diet  made  up  entirely  of  denatured  foods  may  cause 
disease  or  even  death,  due  to  a  deficiency  in  this 
essential  substance. 

A  food  like  milk  which,  given  in  moderate 
amounts,  combines  enough  of  both  of  these  vita- 
mines  to  allow  of  normal  growth  and  development, 
has  a  value  in  the  human  dietary  greater  than  that 
of  any  other  single  food. 

It  is  true  that  appetite  in  many  cases  has  to  be 
considered,  and  an  exclusive  diet  of  any  single 
food  substance  becomes  distasteful  to  the  large 
majority  of  us  and  tends  to  lower  digestive  pro- 
cesses and  to  cause  impaired  nutrition.  However, 
this  does  not  mean  that  the  child  should  be  allowed 
to  refuse  milk  as  a  substantial  part  of  his  daily 
diet,  if  the  diet  includes,  as  it  should,  several 
other  forms  of  food.  All  normal  children  are 
better  for  at  least  1J  pints  of  milk  a  day. 

The  average  chemical  composition  of  milk  is: 

Per  cent. 

Water 87. 1 

Total  solids 12.9 

Fat 3.9 

Casein 2.5 

Albumin 7 

Sugar 5.1 

Ash 7 

The  variation  in  chemical  content  is  given  in  the 
footnote.1 


1  From  a  chemical  standpoint  milk  is  a  very  complex  substance.  The  component 
parts  may,  however,  be  classified  into  a  few  well-marked  groups  as  follows:  (1) 
Water,  (2)  fat,  (3)  nitrogenous  constituents,  (4)  sugar,  and  (5)  ash.  The  com-, 
ponents  other  than  water  are  collectively  known  as  total  solids  or  milk  solids  and 
the  solids  other  than  fat  as  solids  not  fat.  Milk  serum,  or  more  properly  milk 
plasma  is  the  term  used  to  denote  the  milk  minus  the  fat;  hence  the  terms  serum 
solids  and  plasma  solids  are  synonymous  with  solids  not  fat. 

Water:  The  water  in  milk  varies  from  82  to  90  per  cent.  The  usual  variation  in 
mixed-herd  milk  is  much  less  and  is  probably  covered  by  84  to  88  per  cent. 

300 


FOOD  VALUE  OF  WHOLESOME  MILK 

Numerous  have  been  the  nutrition  experts  that 
have  made  special  researches  as  to  the  food  value  of 
milk  when  compared  with  other  foods.  All  of  these 
are  in  substantial  agreement.  The  author  chooses 
the  tables  that  follow  made  by  Dr.  Flora  Rose 
because  they  are  so  clear  cut  and  concise  in  state- 
ment.1 The  prices  used  are  pre-war  prices.  But 
these  can  readily  be  translated  into  the  prices  of  the 
day. 


Fat:  The  fat  in  milk — milk  fat  or  butter  fat — is  not  in  solution  but  exists  as  an 
emulsion  of  microscopic  globules  so  small  that  a  single  drop  of  average  milk 
contains  more  than  one  hundred  millions  of  them.  These  globules,  even  in  milk 
from  one  cow,  are  not  all  of  the  same  size.  Some  may  be  two  or  three  times  the 
size  of  others,  the  average  size  depending  upon  several  factors,  the  principal  one 
of  which  is  the  breed  of  the  animal.  Chemically  the  fat  is  not  a  single  compound 
but  a  mixture  of  several  compounds  known  as  glycerids.  Some  of  the  glycerids 
are  common  to  all  fats,  while  others  are  peculiar  to  butter.  This  fact  is  made 
use  of  in  detecting  oleomargarin. 

Cow's  milk  usually  contains  from  3  to  6  per  cent  of  fat,  depending  very  largely 
upon  the  breed  of  the  animal. 

Nitrogenous  constituents:  These  are  principally  casein  and  albumin,  the  traces 
of  less  important  nitrogenous  compounds.  The  coagulum,  or  curd,  produced 
when  rennet,  dilute  acids,  or  certain  other  chemicals  are  added  to  milk  is  chiefly 
casein.  Albumin  is  the  flaky  precipitate  produced  by  heating  whey  or  skimmed 
milk  from  which  the  casein  has  been  removed.  The  constitution  and  behavior 
of  it  closely  resembles  white  of  egg.  Casein  is  not  really  in  solution  in  the  milk, 
but  exists  in  an  extremely  fine  colloidal  condition  in  combination  with  some  of 
the  ash  constituents.  With  an  appropriate  filter  of  clay  it  is  possible  to  separate 
it  from  the  water.  Albumin  is  in  true  solution  in  the  water  of  the  milk.  Fre- 
quently, but  improperly,  the  term  casein  is  applied  to  all  the  nitrogenous  con- 
stituents in  milk.  Sometimes  the  term  total  proteins  is  used  in  referring  to  the 
nitrogenous  constituents  taken  as  a  whole.  The  amount  of  casein  in  average  cow's 
milk  varies  from  2  to  4  per  cent  and  the  albumin  from  0.5  to  0.8  per  cent. 

Sugar:  Milk  sugar,  or  lactose,  belongs  to  a  group  known  as  carbohydrates  and 
is  a  white  substance  less  sweet  in  taste  than  cane  sugar.  Milk  sugar  is  broken 
up  into  lactic  acid  by  the  action  of  bacteria,  this  bringing  about  the  souring  of 
milk.  Milk  sugar  is  in  solution  in  the  water  of  milk  and  is  present  to  the  extent 
of  from  3.5  to  6  per  cent. 

Ash:  The  ash,  or  the  mineral  part  of  milk  exists  to  the  amount  of  about  0.75 
per  cent  and  consists  largely  of  the  chlorids  and  phosphates  of  sodium,  potassium, 
magnesium,  and  calcium. 

*  Cornell  Reading  Course,  III.     January,  1917. 

301 


THE  PRICE  OF  MILK 

Ten  cents  will  buy  the  following  amounts  of  energy 
in  a  few  typical  foods: 

Calories. 

In  milk  at  10  cents  a  quart 672 . 5 

In  milk  at  8  cents  a  quart 840 . 1 

In  round  steak  at  26  cents  a  pound 271 . 0 

In  eggs  at  35  cents  a  dozen 234 . 0 

In  eggs  at  55  cents  a  dozen 153 . 0 

In  bread  at  6  cents  a  loaf 1,713 . 5 

In  oatmeal  at  5  cents  a  pound 3,601 . 5 

In  cornmeal  at  4  cents  a  pound 4,037.0 

While  milk  is  not  at  the  head  of  this  list,  it  stands 
well  as  compared  with  meat  and  eggs.  The  milk 
fat  and  milk  sugar  in  addition  to  being  sources  of 
energy,  perform  certain  other  functions  as  well.  In 
the  milk  fat  is  the  fat-soluble  A,  the  essential  food 
protective  element  discussed  above.  The  sugar  in 
milk  is  not  the  cane  or  beet  sugar  of  commerce, 
but  lactose,  a  sugar  peculiar  to  animals.  Milk 
sugar  is  but  faintly  sweet.  It  is  an  essential  to 
growth — while  the  sugar  that  pleases  the  "sweet 
tooth"  is  not.  Milk  sugar  is  believed  to  be  im- 
portant in  holding  in  check  putrefactive  changes 
in  the  contents  of  the  large  intestine  and  thus  per- 
forming the  beneficial  effects  supposed  to  come 
from  buttermilk  and  other  sour  milks.1 

In  protein  ten  cents  will  buy: 

Grams  of 
Protein. 

In  milk  at  8  cents  a  quart 40.00 

In  milk  at  10  cents  a  quart 32 . 00 

In  cheese  at  25  cents  a  pound 52 . 26 

i  Cf.  Rettger,  L.  F.,  Jour.  Exper.  Med.,  21;   4;   365-388,  1915. 

302 


FOOD  VALUE  OF  WHOLESOME  MILK 

Grams  of 
Protein. 

In  round  steak  at  26  cents  a  pound 37. 14 

In  eggs  at  35  cents  a  dozen - 20. 60 

In  eggs  at  55  cents  a  dozen 13 . 85 

In  dried  lima  beans  at  10  cents  a  pound 82. 10 

In  white  bread  at  6  cents  a  loaf 61 . 50 

In  cornmeal  at  4  cents  a  pound 104 . 30 

In  oatmeal  at  5  cents  a  pound 151 .30 

In  discussing  the  protein  in  milk  Miss  Rose  says: 

These  figures  without  adequate  explanation 
indicate  that  milk  is  not  a  very  cheap  source  of 
protein.  This  criticism  of  the  cost  of  protein  in 
milk  would  be  convincing  if  it  were  not  for  certain 
facts  recently  made  clear  about  protein.  Protein 
is  a  name  given  to  a  group  of  substances  differing 
rather  widely  in  their  value  to  the  body.  Two 
foods  may  contain  the  same  amount  of  protein;  but 
an  ounce  of  the  protein  from  the  first  food  may  be 
much  more  valuable  in  building  and  repairing  tis- 
sue than  an  ounce  of  the  protein  from  the  second 
food. 

Exact  data  making  it  possible  to  say  that  this  or 
that  protein  is  twice  or  three  times  as  valuable  as 
another  protein  are  scarce,  but  some  comparative 
figures  on  the  value  of  various  proteins  in  animal 
feeding  are  available,  which  will  illustrate  the 
point  sufficiently  well  to  clear  up  the  record  of 
milk  as  a  cheap  source  of  protein.  McCollum 
(1916)  gives  the  following  table  to  show  what 
percentage  of  various  proteins  eaten  by  pigs  is 
used  for  building  tissue: 

Percentage. 

Oil  meal  proteins 16-17 

Wheat  proteins 20 

Corn  proteins 24 

Oat  proteins 25 

303 


THE  PRICE  OF  MILK 

Percentage. 

Wheat  germ  proteins 40 

Casein  of  milk 45 

Skim  milk  proteins 63 

Hart  and  Humphrey  (1915),  as  a  result  of  experi- 
ments to  determine  what  foods  are  best  for  the 
growing  animal  and  for  milk  production,  state 
that  milk  proteins  have  an  efficiency  for  milk 
production  and  tissue  restoration  of  60  per  cent  as 
compared  with  an  efficiency  of  40  per  cent  for  corn 
proteins  and  36  per  cent  for  wheat  proteins. 

Milk  of  all  the  common  foods  is  the  richest  in 
available  lime.  Ten  cents  will  buy  the  following 
amounts  of  lime  in  common  foods. 

Grams  of 
Lime. 

In  milk  at  8  cents  a  quart 2.045 

In  milk  at  10  cents  a  quart 1 . 636 

In  milk  at  15  cents  a  quart 1 . 090 

In  milk  at  20  cents  a  quart 810 

In  cheese  at  25  cents  a  pound 1 . 990 

In  eggs  at  35  cents  a  dozen 149 

In  eggs  at  55  cents  a  dozen 096 

In  round  steak  at  26  cents  a  pound 019 

In  dried  lima  beams  at  10  cents  a  pound 450 

In  white  bread  at  6  cents  a  loaf 198 

In  whole  wheat  bread  at  12  cents  a  loaf 226 

In  cornmeal  at  4  cents  a  pound 170 

In  oatmeal  at  5  cents  a  pound 1 . 179 

Milk  is  also  rich  in  phosphorus  as  well  as  in  lime 
and  is  a  cheap  source  for  this  valuable  food  element. 
While  low  in  iron  content,  the  amount  of  lime 
increases  the  ability  of  the  body  to  use  iron.  These 
minerals  are  essential  food  products. 

304 


FOOD  VALUE  OF  WHOLESOME  MILK 

Milk  is  a  complete  food  containing  all  the  elements 
necessary  to  nutrition  and  growth. 

Butter,  because  it  contains  the  fat-soluble  A,  has 
a  food  value  not  found  in  important  quantities  in 
oleomargarin  or  other  substitutes  for  butter.  In 
the  margarin  that  contains  no  milk  fat  or  beef  fat, 
both  the  fat-soluble  A  and  the  water-soluble  B  are 
wanting.  In  the  beef  margarins  that  contain  some 
beef  fat,  the  fat-soluble  A  is  present,  but  not  so 
plentifully  as  in  butter  fat.  Butter  is  not  the  only 
source  of  the  fat-soluble  A,  but  it  is  an  important 
source.  Says  Professor  McCollum  on  this  point: 

If  the  diet  contains  a  liberal  amount  of  milk, 
eggs,  glandular  organs  or  the  leaves  of  plants,  it 
will,  if  otherwise  satisfactorily  constituted,  prevent 
the  onset  of  the  eye  disease.  The  seeds  and  seed 
products,  such  as  wheat  flour  (bolted),  degermi- 
nated  cornmeal,  polished  rice,  starch,  the  sugars, 
syrups,  tubers,  roots,  such  as  the  radish,  beet, 
carrot,  turnip,  etc.,  and  also  the  muscle  tissue  of 
animals,  such  as  ham,  steak,  chops,  etc.,  do  not 
contain  enough  of  the  fat-soluble  A  to  be  classed 
as  important  sources  of  this  dietary  essential. 
The  tubers  and  roots  appear  to  be  somewhat 
richer  in  it  than  are  the  seeds.  In  the  form  in 
which  they  are  ordinarily  eaten  as  mashed  or 
baked  potato,  baked  sweet  potato,  fresh  or  creamed 
radish,  cooked  carrots,  beets  or  creamed  turnips, 
the  water  content  of  the  dish  as  served  is  so  high 
that  the  amount  of  solids  eaten  is  not  a  very  high 
percentage  of  the  total  food  supply,  and  the 
protective  action  is  correspondingly  limited.  In 


Op.  cit.,  p.  89. 

20  305 


THE  PRICE  OF  MILK 

America,  however,  potatoes  are  seldom  eaten  with- 
out the  addition  of  butter.  The  vegetable  fats 
and  oils,  such  as  olive,  cottonseed  oil,  peanut  and 
cocoanut  oils,  although  good  energy  yielding  foods, 
do  not  furnish  this  dietary  essential.  The  body 
fats  of  animals  such  as  lard,  beef  fat,  etc.,  are  not 
important  sources  of  the  fat-soluble  A. 

This  growth-producing  fat-soluble  A  does  not  de- 
teriorate when  the  butter  is  held  in  storage1  nor 
when  it  is  heated  with  live  steam  for  two  and  one- 
half  hours,2  which  is  higher  temperature  and  more 
prolonged  period  of  heating  than  the  milk  fat  is 
subjected  to  during  the  process  of  manufacture 
into  butter.3 

Milk,  therefore,  compares  well  with  other  foods  in 
its  chemical  food  value  content,  but  it  must  be 
repeated  that  the  chemical  test  is  not  the  sole  test 
as  to  the  nutrient  properties  of  foods.  To  quote 
once  more  from  the  authority  in  these  matters, 
Professor  McCollum: 

It  is  fallacious  reasoning  to  attempt  to  compare 
the  money  value  of  certain  foods  with  certain 
others.  We  may  safely  compare  the  cost  of  the 
cereal  grains  or  the  legumes  with  each  other,  or  with 
the  tubers  such  as  the  potato  or  the  sweet  potato 
or  with  the  root  foods.  It  is  not  possible  to  com- 
pare the  cost  of  any  of  these  with  milk  or  the 
leafy  vegetables,  such  as  cabbage,  cauliflower, 
Swiss  chard,  collards,  Brussel  sprouts,  onions, 


i  Osborne,  T.  B.t  and  Meldel,  L.B.,  "  The  Stability  of  the  Growth-Promoting 
Substance  in  Butter  Fat,"  The  Jour.  Chem.,  Vol.  24,  No.  1,  p.  38,  1915. 

8  Osborne,  T.  B.,  and  Meldel,  L.  B.,  "  Further  Observations  of  the  Influence  of 
Natural  Fats  upon  Growth,"  The  Jour.  Biol.  Chem.,  Vol.  20,  pp.  37  and  384, 1915. 

» Guthrie,  "The  Book  of  Butter,"  p.  17. 

306 


FOOD  VALUE  OF  WHOLESOME  MILK 

lettuce,  celery  tops,  spinach,  turnip  tops  and  other 
leaves  employed  as  greens.  Milk  and  the  leafy 
vegetables  are  to  be  regarded  as  protective  foods. 
In  some  degree  eggs  are  to  be  considered  in  the 
same  class.  Milk  and  the  leafy  vegetables  should 
be  taken  in  liberal  amounts.  The  leaves  should 
not  be  regarded  as  foods  of  low  value  because 
their  content  of  protein,  fat  and  carbohydrate  is 
low  and  the  content  of  water  high.  When  com- 
pared on  the  basis  of  chemical  composition  they 
appear  inferior  to  seeds,  but  they  have  a  peculiar 
value  in  their  high  content  of  fat-soluble  A  and 
of  mineral  elements,  which  makes  them  stand  in 
a  class  by  themselves  among  the  vegetable  food- 
stuffs.1 

In  the  report  to  Food  Administrator  Hoover  the 
Milk  Committee2  summed  up  the  actual  food  value 
of  milk  in  feeding  the  family  as  follows: 

1.  Milk  is  the  ideal  food  for  infants. 

2.  Milk  is  the  best  single  kind  of  food  for  the 
proper  development  of  growing  children. 

3.  Milk  is    necessary    in    any    family    dietary 
that  is  based  on  the  welfare  of  adults. 

4.  Milk  has  these   values   to   the   health   and 
development  of  the  family  because  it  meets  the 
nutritive  needs  of  the  human  body. 

For  a  given  amount  of  money,  milk  will  furnish 
a  higher  percentage  of  available  building  materials 


1  Op.  cit.,  p.  141,  142.  "No  thorough  studies  of  the  dietary  property  of  fruits," 
says  Professor  McCollum,  "have  yet  been  made,  but  from  their  known  chemical 
composition  and  biological  functions  as  storage  organs,  their  proper  place  in  the 
diet  can  be  predicted.  They  are  good  sources  of  mineral  salts  and  of  energy- 
yielding  food,  the  sugars.  They  are  highly  palatable  and  exert  a  favorable  in- 
fluence on  the  excretory  processes  of  the  kidneys  and  the  intestine.  Their  liberal 
use  in  the  diet  should  be  encouraged  " 

8  For  names  of  this  committee  see  page  109. 

307 


THE  PRICE  OF  MILK 

than  almost  any  other  food.  Milk  is  one  of  the 
most  important  sources  of  the  factors  in  foods  that 
are  essential  to  growth,  health  and  body  regulatory 
functions. 

That  pasteurization  does  not  destroy  the  food 
value  of  milk  has  been  shown  in  Chapter  IX. 

The  best  present-day  knowledge  as  to  the  food 
value  of  milk  powders  and  of  condensed  milk  as 
compared  with  fresh  whole  milk  was  expressed  in  the 
following  resolution  adopted  at  the  annual  meet- 
ing of  the  National  Commission  on  Milk  Standards 
in  Chicago  on  December  8,  1918: 

The  use  of  powdered  whole  milk,  skim  milk 
powder,  condensed  or  evaporated  whole  milk  or 
skim  milk,  butter  fat  or  other  fats  and  water  and 
of  machines  for  combining,  mixing  or  emulsifying 
these  materials  for  the  production  of  manufactured 
milk  or  cream  was  considered  by  a  special  com- 
mittee including  some  of  the  food  chemists  of  the 
commission.  Their  special  report  on  these  sub- 
jects was  adopted  by  the  commission  and  was  as 
follows: 

1.  Since  the  application  of  the  term  "synthetic" 
to  mixtures  such  as  those  under  consideration  is 
not  entirely  consistent  with  the  accepted  scientific 
use  of  the  term  and  is  likely  to  cause  confusion, 
we  recommend  that  the  use  of  the  term  "syn- 
thetic" be  discouraged  and  that  the  commission 
recommend  the  terms  "recombined  milk,"  "re- 
constituted milk,"  on  the  labels  of  products  made 
entirely  from  milk  constituents,  and  "artificial 
milk"  or  "milk  substitute"  on  the  labels  of 
products  in  which  any  other  fat  is  substituted  in 
whole  or  in  part  for  milk  fat. 
308 


FOOD  VALUE  OF  WHOLESOME  MILK 

2.  The  committee  moves  the  adoption  of  the 
following  resolution: 

"WHEREAS,  Recent  investigations  in  the 
science  of  nutrition  have  fully  demonstrated 
the  unique  value  of  milk  as  a  food  and  the  inti- 
mate relation  between  adequate  milk  con- 
sumption and  the  support  of  normal  growth  or 
maintenance  of  health  and  vigor;  be  it 

"Resolved,  That  the  commission  urge  upon  all 
concerned  with  the  production  and  distribution 
of  milk,  whether  as  producers,  dealers  or  public 
health  and  food  control  officials,  the  great  im- 
portance of  bringing  into  human  consumption 
the  largest  possible  proportion  of  all  wholesome 
milk  products,  and  to  this  end  recommends  that 
the  sale  of  such  products  as  recombined  milk 
should  not  be  hampered  by  any  restrictions  be- 
yond those  absolutely  necessary  for  the  pre- 
vention of  fraud  and  the  protection  of  health/' 

3.  In  the  case  of  recombined  milk  made  ex- 
clusively from  cream  or  butter  and  milk  or  skim 
milk,   fresh,   condensed   or  dried,   the   materials 
having  always  been  maintained  in  sound  condition 
and  not  subjected  to  unnecessary  heating,   the 
interests  of  the  consumer  in  our  opinion  demand 
nothing  further  than  that  the  product  as  delivered 
to  the  purchaser  shall  meet  all  the  requirements  as 
to  cleanliness,  bacterial  count  and  chemical  com- 
position of  fresh  milk  of  the  same  grade  or  class 
and  shall  be  labeled  in  a  manner  that  will  correctly 
indicate  its  true  character. 

All  grades  of  milk  up  to  18  per  cent  cream  are 
now  successfully  dried.  The  composition1  of  several 
of  these  dried  products  follows: 

1  Stocking,  Wm.  A.,  "Manual  of  Milk  Products,"  1917,  MacMillan  Company. 

309 


THE  PRICE  OF  MILK 


Butter  Fat 

Casein 

Albumin 

Milk  Sugar 

Ash 

Moisture 

(per  cent). 

(per  cent). 

(per  cent). 

(per  cent). 

(per  cent). 

(per  cent). 

Skim  milk  

1.35 

29.79 

7.91 

49.94 

8.21 

2.40 

Half  f»kim 

14.20 

25.56 

6.70 

44  41 

7  01 

2  12 

15  per  cent  cream  

65.15 

10.60 

2.82 

17.86 

2.91 

0.66 

18  per  cent  cream  

70.47 

9.08 

2.42 

15.01 

2.46 

0.56 

Buttermilk  also  can  be  powdered.  Professor 
Stocking  gives  the  composition  of  dried  buttermilk 
as  follows: 

Per  cent. 

Butter  fat 8.0 

Protein 34.0 

Milk  sugar 40. 0 

Lactic  acid 6.0 

Moisture 9.5 

Ash..  2.5 


100.0 

These  powdered  or  dried  milk  products  will  keep 
many  months  with  no  increase  in  the  bacterial  count. 

There  are  available  annually  in  this  country  about 
15,000,000  pounds  of  skim  milk.  Too  much  of  this 
has  gone  to  waste.  This  waste  can  be  prevented  by 
drying  or  condensing  skim  milk  and  by  using  it  in 
the  home  in  a  liquid  state  or  as  cheese.  The  com- 
parative value  of  skim  milk  and  whole  milk  are: 


Skim  Milk 
90 . 5  per  cent  water 
0 . 3  per  cent  unavailable 

nutrients 

3 . 3  per  cent  protein 
0 . 3  per  cent  fat 
5 . 1  per  cent  carbohydrates 
0 . 5  per  cent  ash 


Whole  Milk 
87 . 0  per  cent  water 
0 . 5  per  cent  unavailable 

nutrients 

3 . 2  per  cent  protein 
3 . 8  per  cent  fat 
5 . 0  per  cent  carbohydrates 
0 . 5  per  cent  ash 
310 


FOOD  VALUE  OF  WHOLESOME  MILK 

One  pint  of  skim  milk  furnishes  170  calories;  one 
pint  of  whole  milk  furnishes  310  calories. 

Skim  milk  is  essentially  liquid  lean  meat.  Five 
pints  of  separator  skim  milk  contains  chemically  the 
same  food  value  as  one  pound  of  meat.  Roughly 
speaking,  meat  and  cottage  cheese  are  of  equal  food 
value,  pound  for  pound.  On  the  average,  15  pounds 
of  cottage  cheese,  can  be  made  from  100  pounds  of 
skim  milk.  Cottage  cheese  is  composed  of  about 
72  per  cent  water,  20  per  cent  protein,  1  per  cent  fat, 
4.3  per  cent  carbohydrates  and  1.8  per  cent  ash. 

The  food  value  of  milk  is  thus  summarized  by  Dr. 
McCollum : 

It  is  a  fact  too  well  known  to  need  comment,  that  milk 
is  a  complete  food  for  a  young,  growing  animal  and 
that  for  a  certain  period  after  birth,  a  period  which  varies 
with  the  species,  no  other  food  can  take  its  place  without 
disaster.  It  is  not  so  well  known  that  milk  is  a  food 
of  exceptional  value  for  the  adult,  although  a  few  medical 
men  have  fully  appreciated  this  fact.  Dr.  Wier  Mitchell 
many  years  ago  had  remarkable  success  in  the  treatment 
of  patients  suffering  from  neurasthenia,  by  keeping  them 
in  bed  confined  to  a  diet  which  was  principally  milk. 
It  is  of  unusual  interest  to  note  that  Harvey,  the  discoverer 
of  the  circulation  of  the  blood,  in  reporting  on  his  autopsy 
of  Thomas  Parr,  who  is  stated  to  have  lived  to  the  age 
of  153  years,  says  that  his  diet  until  just  before  his  death 
when  he  was  invited  to  the  court  of  King  Charles  in 
1635  consisted  of  subrancid  cheese,  and  milk  in  every 
form,  coarse  bread  and  small  drink,  generally  sour 
whey.  .  .  .  Milk  is  therefore  so  constituted  as  to  make 
an  ideal  food  for  supplementing  the  ordinary  vegetable 
foods  which  should  form  a  considerable  part  of  our  diet. 

311 


THE  PRICE  OF  MILK 

It  corrects  the  deficiencies  of  these  in  a  remarkable  way. 
In  order  to  obtain  best  results,  however,  it  is  best  to  use 
with  the  ordinary  vegetable  foods,  but  a  small  amount 
of  meat,  a  quart  of  milk  a  day  for  each  member  of  the 
family,  and  as  much  of  one  or  another  of  the  green  leafy 
vegetables  as  the  appetite  will  permits 

1  McCollum,  E.  V.  and  Simmons,  Nina.     "  The  American  Home  Diet,"  Fred- 
erick C.  Mathews  Co.,  1920,  p.  69. 


312 


CHAPTER  XIV 

Cooperation  and  Price 

One  of  the  theories  of  our  industrial  life  has  been 
that  competition  assured  a  fair  price  to  producer 
and  to  consumer.  According  to  this  theory  price 
was  the  result  of  forces  beyond  control  and  hence 
the  wisest  policy  was  to  let  those  forces  alone  and 
accept  as  the  gift  of  the  gods  whatever  price  they 
brought.  To  this  "law  of  supply  and  demand "  we 
were  to  abdicate  the  throne  of  reason  and  social 
control.  In  this  view,  price  was  to  be  accepted 
without  protest  as  cows  in  pasture  take  the  rain: 
content  with  the  downpours  that  fatten  and,  shiver- 
ing, submit  in  silence  to  the  long  cold  drizzles  that  kill. 

But  price  is  not  necessarily  the  result  of  iron  laws 
that  bind  the  hands  of  endeavor  and  stifle  the  voice 
of  social  need.  Prices  are  man-made.  They  may 
have  in  them  the  sentiment  of  good  will,  the  desire 
to  do  well,  the  sense  of  obligations  to  others,  the 
ethical  and  living  standards  of  those  who  buy  and 
sell.  Being  man-made,  prices  are  subject  to  human 
control  and  are  in  large  part  what  we  desire  them 
to  be,  if  we  have  but  the  vision,  the  skill,  the  per- 
sistency of  endeavor  and  the  good  will  that  brings 
the  cooperation  essential  to  sound  price  adjustments. 

A  few  crowded  years  ago,  because  of  rising  feed 
and  labor  costs,  farmers  had  to  get  a  higher  price 

313 


THE  PRICE  OF  MILK 

for  their  milk  to  get  back  costs  of  production.  One 
way  to  secure  an  advance  in  price  is  to  let  milk  get 
so  scarce  that  the  short  supply  will  force  up  the 
price,  leaving  each  farmer  to  sell  at  what  he  can  get 
and  to  stop  production  when  he  must.  This  method 
is  effective.  Effective  because  it  bankrupts  some 
dairymen  who  hope  too  long;  effective  because  it 
slaughters  cows,  leaves  dairy  barns  to  rot,  and 
destroys  the  fertility  of  the  fields;  effective  because 
it  disgusts  whole  districts  with  dairy  production, 
and  turns  their  energies  to  other  products  of  the 
farm;  effective  because  it  costs  so  heavily  to  the 
next  generation  of  children  whose  milk  must  be 
higher  priced  in  order  to  entice  back  the  confidence 
of  dairy  districts,  reclaim  the  farms,  rebuild  the 
barns,  grow  cows  from  calves  and  replace  bank- 
ruptcy with  prosperity.  Such  is  the  law  of  supply 
and  demand  when  unguided  by  the  torch  of  vision 
in  the  hand  of  cooperative  helpfulness. 

There  is  another  method  for  raising  up  the  price 
of  milk  to  the  point  where  production  will  be  main- 
tained or  increased  to  meet  growing  needs.  This 
method  starts  with  a  meeting  of  milk  producers 
who  see  the  need  for  a  higher  price.  Their  decision 
is  not  to  kill  their  herds,  but  to  get  others  to  believe 
in  their  needs  and,  believing,  help.  The  first  step 
is  to  get  a  thorough  organization  among  milk  pro- 
ducers so  that  they  may  bargain  as  one  man  with 
the  one  milk  dealer  to  whom  they  sell.  This  one 
dealer  sees  the  need  for  getting  others  to  join  with 
him.  Perchance,  being  human,  his  first  effort  is 

314 


COOPERATION   AND  PRICE 

to  get  others  to  join  with  him  to  prevent  the  pay- 
ment of  a  higher  price,  or  at  least  to  make  certain 
that  others  pay  as  high  a  price  as  he  does.  The 
cooperation  of  other  dealers  to  this  end  means  only 
that  the  milk  producers  in  their  districts  must  also 
organize  to  assure  equality  of  bargaining  power. 

Dealers  organized  and  producers  organized  agree 
on  prices  that  affect  the  consumer.  Consumers 
complain  much,  suffer  long  and  patiently,  then  a 
few  consumers  get  together  to  "see  what  can  be 
done  about  it."  At  first,  being  human  also,  they 
decide  to  boycott  milk  and  bring  the  "  producer- 
distributor  milk  trust "  to  terms.  In  this  they  are 
aided  by  reporters  who  write  stories  that  say  what 
consumers  want  to  hear.  Some  city  attorney  with 
the  political  itch  puts  the  farmers  who  are  trying 
to  preserve  their  properties  in  jail  for  conspiracy  to 
restrain  trade. 

But  in  time  wiser  counsels  prevail.  Organized 
consumers,  organized  dealers  and  organized  farmers 
get  together.  Each  group  states  their  needs  and 
all  learn  that  by  cooperation  each  group  can  get 
justice  in  price.  The  demand  for  milk  is  widened 
because  consumers  learn  the  true  food  value  of  the 
milk  they  buy.  The  representatives  of  consumers 
find  that  the  price  they  thought  was  too  much  was 
still  less  than  the  milk  is  actually  worth  in  money. 
They  plead,  however,  that  milk  is  a  necessity  for  all 
children  and  the  price  should  therefore  be  based, 
not  on  all  that  the  traffic  will  bear,  but  on  a  program 
of  efficient  production  on  the  farm,  with  the  least 

315 


THE  PRICE  OF  MILK 

possible  costs  in  distribution.  The  farmers  reply 
that  their  interest  is  in  the  annual  net  return,  and 
that  they  are  ready  to  accept  somewhat  lower 
prices  in  the  autumn  if  the  organized  consumers 
will  cooperate  to  increase  consumption  in  the  spring 
months  when  production  costs  are  as  high  as  in  the 
autumn  but  when  milk  production  is  higher  only 
because  cows  are  fresh.  Consumers  point  out  that 
drivers  of  retail  wagons  are  careless  in  collecting 
bottles  and  that  there  are  too  many  retail  wagons 
on  each  street.  The  dealers  reply  that  they  can 
lower  the  costs  of  distributing  if  consumers  will  take 
pains  to  put  their  bottles  out  each  morning,  report 
the  names  of  drivers  who  are  careless  in  collecting 
bottles,  and  see  to  it  that  bottles  are  not  used  for 
preserves  or  carelessly  broken  in  the  home.  The 
dealers  also  indicate  their  willingness  to  reduce  the 
number  of  wagons  on  each  street  by  agreeing  to  a 
minimum  load  on  each  wagon  and  a  minimum 
average  load  for  all  wagons.  Costs  are  lowered  in 
the  country  by  the  cooperation  of  organized  farmers 
and  organized  dealers  to  prevent  unnecessary  dupli- 
cation in  country  receiving  stations;  and  the  cooper- 
ation of  transportation  companies  is  assured  to  get 
proper  and  adequate  facilities  for  shipping  milk  to 
the  city.  With  these  assurances  the  farmers' 
organization  urge  their  members  to  cool  their  milk 
properly  because  so  to  do  widens  their  market 
through  a  more  wholesome  product  and  gives  to 
the  organized  consumers  a  product  they  can  push 
more  vigorously. 

316 


COOPERATION  AND  PRICE 

In  planning  their  spring  campaign  for  increased 
milk  consumption  the  organized  consumers  elicit 
the  cooperation  of  teachers  in  the  schools  in  teach- 
ing the  food  value  of  milk  and  in  distributing 
leaflets  giving  recipes  for  the  use  of  milk.  The 
officials  of  charity  organizations  agree  to  bring  these 
recipes  and  the  facts  as  to  the  food  value  of  milk 
to  the  attention  of  those  whom  they  visit.  Knowing 
the  facts  and  the  needs,  the  physicians  also  agree  to 
help  in  this  campaign.  The  bulletins  published  by 
various  governmental  agencies  are  ransacked  for 
information  to  be  used.  For  it  avails  nothing  that 
the  scientists  know  the  facts  about  the  food  value 
of  milk  unless  the  mother  in  every  home  knows 
and  acts  on  these  facts.  Moving  pictures  are 
enlisted,  posters  in  the  street  cars  and  on  the  retail 
wagons  tell  the  value  of  milk  as  compared  in  prices 
with  other  foods.  Health  officials  join  lustily  in  the 
movement,  knowing  its  value  to  public  health  and 
welfare. 

As  the  season  of  maximum  production  approaches, 
it  may  be  found  that  the  prices  for  butter,  cheese 
and  condensed  milk  are  too  low  to  safeguard  pro- 
duction. The  cooperation  of  the  federal  authorities 
is  sought  to  relieve  or  encourage  the  export  situa- 
tion. To  obtain  and  maintain  a  good  export  trade 
standards  are  necessary  and  the  aid  of  the  national 
bureau  of  markets  with  the  cooperation  of  state 
market  bureaus  is  enlisted  to  assure  standards  in 
production,  manufacture,  package,  storage  and  trans- 
portation that  will  give  us  an  entrance  into  inter- 

317 


THE  PRICE  OF  MILK 

national  markets.  Prices  to  farmers  soon  reflect 
this  new  confidence  in  future  prices  for  milk  products. 

And  what  are  the  achievements  of  these  coopera- 
tive methods?  Through  stabilized  prices  the  net 
return  to  the  producer  for  the  year  is  such  as  to 
keep  the  output  of  milk  up  to  the  larger  amount 
needed;  the  price  to  the  consumer  of  whole  milk  is 
stabilized  on  a  year  round  basis  so  that  the  price 
for  milk  in  the  autumn  months  when  it  is  most 
needed  by  consumers  because  of  the  scarcity  of 
green  vegetables  will  not  be  unreasonably  above  the 
price  in  the  summer  when  such  vegetables  are 
plentiful;  to  this  same  end  it  is  agreed  that  the 
spread  to  the  milk  dealer  from  f.  o.  b.  city  to  the 
consumer  shall  be  wider  in  the  spring  and  summer 
in  order  that  it  may  be  smaller  in  the  autumn  months 
and  thus  further  aid  to  stabilize  the  price  to  con- 
sumers; the  price  to  the  consumer  reflects  the 
savings  in  economical  milk  distribution  in  that 
avoidable  duplication  of  investments  and  of  wagons 
on  the  street  is  done  away  with;  the  investments  of 
milk  dealers  are  safeguarded  so  that  the  return  need 
not  include  an  added  risk  due  to  discontent  as  to 
milk  prices  in  the  country  or  in  the  city.  All  parties 
are  financially  better  off.  And  that  because  they 
understand  each  other.  And  all  have  learned  that 
the  law  of  supply  and  demand  can  be  brought  to 
reflect  social  needs  and  fair  prices. 

But  this  is  all  a  dream  you  say?  Quite  to  the 
contrary  these  are  the  methods  that  have  been  used 
and  the  results  that  have  been  secured  in  Philadel- 

318 


COOPERATION  AND  PRICE 

phia,  Pittsburgh,  Baltimore,  Detroit  and  other  cities 
in  the  United  States. 

And  all  this  without  the  use  of  power?  Not  at 
all.  All  of  this  just  because  of  the  effective  mobil- 
ization of  power.  Producers,  organized,  can  effec- 
tively refuse  to  sell.  Consumers,  organized,  can 
effectively  refuse  to  buy.  Dealers,  organized,  can 
effectively  refuse  to  buy  and  to  sell.  Neither, 
unorganized,  can  do  this.  Nor  can  either  group 
get  its  best  results  until  both  the  other  groups  are 
thoroughly  organized.  Useless  one  without  the 
other.  For  one,  alone,  can  be  unfair;  and  unfair 
prices  in  time  bring  their  own  penalties. 

The  night  of  the  day  of  individual  effort  unaided 
by  cooperation  is  over.  The  dawn  of  the  new  day 
of  enlightened  cooperation  is  at  hand;  a  cooperation 
that  is  enlightened  because  it  is  powerful  enough  to 
get  a  full  hearing  and  a  full  hearing  begets  justice. 

But  does  this  not  mean  economic  strife?  Progress 
comes  through  the  struggle  of  equals.  It  is  bush- 
whacking, not  fair  price  bargaining,  for  organized 
dealers  to  say  to  individual  farmers  what  price  they 
are  to  get  for  milk,  or  for  organized  farmers  to  name 
a  price  to  individual  dealers  or  for  organized  farmers 
and  organized  dealers  to  set  prices  to  be  paid  by 
individual  consumers.  Price  conferences  should 
include  all  three  elements  through  representatives 
with  a  power  sufficiently  organized  to  get  fair 
treatment. 

The  agents  of  government  when  thus  supported 
can  be  effective  whether  as  mediators  or  in  aiding 

319 


THE  PRICE  OF  MILK 

marketing  or  in  the  protection  of  health  and  public 
welfare.  Government  officials  need  not  then  assume 
burdens  they  cannot  carry.  Only  organized  pro- 
ducers and  organized  consumers  are  effective  with 
any  governmental  organization  under  the  large 
industrial  units  of  the  day.  In  cooperation  is  power. 
Our  forefathers  put  this  another  way:  "In  union 
there  is  strength/'  Through  cooperation  with 
power,  prices  can  be  made  just  and  kept  so. 

The  elements  in  cooperation  of  the  kind  charac- 
terized above  have  been  exemplified  for  a  consider- 
able period  in  Philadelphia,  Pittsburgh  and  Balti- 
more. The  results  have  been:  a  price  to  producers 
equal  to  and  at  times  above  that  in  other  primary 
districts;  a  lower  relative  cost  of  distribution;  a 
price  to  consumers  below  that  prevailing  in  nearby 
cities  where  farmers  have  received  a  lower  price; 
a  wholesome  stabilized  market  for  both  producers 
and  dealers.1  The  plans  differ  slightly  in  each  of 
these  cities,  though  their  essentials  are  the  same. 
It  will  suffice  for  the  plans  in  all  three  cities  to  give 
here  the  important  elements  in  the  Pittsburgh  Plan. 

The  Pittsburgh  Plan 

When  the  Food  Administration  was  demobilized 
and  its  arbitral  work  came  to  an  end  the  representa- 
tives of  the  two  farmers'  organizations  centering  in 
Philadelphia  and  in  Pittsburgh  joined  with  repre- 
sentative consumers  and  milk  dealers  in  asking  the 

1  See  especially  chart  on  page  156. 

320 


C06PERATION  ANb  PRICE 

Governor  of  Pennsylvania  to  appoint  a  milk  price 
arbitrator  to  arbitrate  price  differences  between  pro- 
ducers, dealers  and  consumers.  The  organized 
farmers  did  not  believe  that  their  power  to  strike 
should  be  uncontrolled  nor  did  the  dealers  believe 
that  their  power  to  refuse  to  buy  should  be  exercised 
save  in  the  long-time  public  interest;  and  both  felt 
that  the  public  should  be  party  to  prices  so  pertinent 
to  human  welfare  as  are  milk  prices.  This  principle 
is  the  fundamental  one  in  the  Pittsburgh  Plan  as  it 
is  in  Philadelphia  and  Baltimore. 

This  arbitrator  meets  with  the  monthly  price 
conference  presided  over  by  the  county  agent.1  In 
attendance  also  are  about  a  half  dozen  women 
representing  the  Congress  of  Women's  Clubs  of 
Western  Pennsylvania,  the  Catholic  Women's  League, 
the  Housekeepers'  League,  the  Public  Health  Nursing 
Association,  the  Consumers'  League,  and  the  Milk 
and  Ice  Fund.  These  conferences  are  open  to  the 
public.  The  reporters  for  the  newspapers  are  in- 
vited and  attend.  An  accountant  named  by  the 
arbitrator  goes  over  the  books  of  the  milk  dealers 
and  presents  his  findings  to  the  arbitrator.  These 
findings  for  the  market  as  a  whole  are  given  in 
general  to  the  conference.  The  arbitrator  never 
gives  out  facts  as  to  any  one  milk  distributor. 
Reports  are  at  hand  from  a  county  agent2  who  has 
continuous  information  as  to  production  costs  in  the 
district.  The  dealers  and  producers  give  their  facts 

1  Mr.  N.  S.  Grubbs  of  Allegheny  County,  Pa. 
8  Mr.  J.  M.  McKee  of  Washington  County,  Pa. 

21  321 


THE  PRICE  OF  MILK 

as  to  costs  and  market  conditions  and  present  their 
price  arguments  in  open  meeting.  Conference  com- 
mittees may  be  appointed.  The  representatives  of 
the  public  aid  in  any  and  all  ways  pertinent  to  the 
welfare  of  producers,  distributors  or  consumers. 
Prices  thus  agreed  on  are  respected  by  all  the  pur- 
chasers in  the  district.  The  State  Agricultural 
College,  the  Pittsburgh  Chamber  of  Commerce  both 
have  joined  in  this  cooperative  effort. 

Representatives  of  producers,  and  the  public 
dealers  have  been  and  are  willing  to  hear  "the  other 
side."  All  parties  have  accepted  heartily  the  prin- 
ciple of  arbitration  and  have  recognized  in  spirit 
and  in  letter  the  interest  which  each  of  the  other 
groups  has  in  the  price  for  milk. 

The  spirit  of  the  Pittsburgh  plan  was  expressed  by 
the  following  resolutions  adopted  by  the  congress 
of  Women's  Clubs  of  Western  Pennsylvania  on 
November  29,  1919: 

Whereas,  The  farmers  producing  milk  for  the 
Pittsburgh  district  have  in  their  price  conferences 
considered  the  interests  of  the  consumer;  and 

Whereas,  The  milk  dealers  in  Pittsburgh  are 
taking  substantial  losses  during  the  month  of 
December  in  order  that  the  price  to  the  consumer 
may  not  be  advanced  over  the  November  prices; 
and 

Whereas,  The  producers  and  milk  dealers  in- 
clude a  committee  of  consumers  in  their  price 
conferences  and  accept  the  principle  of  arbitration 
as  to  prices  to  be  paid  by  producers  and  consumers; 
therefore,  be  it 

322 


COOPERATION   AND   PRICE 

Resolved,  That  we,  the  Congress  of  Women's 
Clubs  for  Western  Pennsylvania,  endorse  the 
principles  and  methods  used  in  these  milk 
price  conferences  and  recommend  to  all  business 
and  to  all  laborers  the  advisability  of  accepting 
similar  principles  at  this  time  and  including  the 
interest  of  consumers  in  setting  prices  and  fixing 
wages. 

This  is  not  an  arbitral  court.  The  arbitrator  has 
only  publicity  powers.  The  plan  simply  represents 
the  elements  essential  to  fair  prices  in  the  milk 
industry  under  twentieth  century  conditions.  It 
is  the  new  way  of  giving  achievement  opportunities 
to  that  race-old  economic  principle:  "The  Lord 
helps  them  that  help  themselves. "  The  heart  of  the 
plan  is  collective  bargaining  in  the  public  presence 
in  the  best  interests  of  all,  with  no  one  party  at 
interest  an  autocratic  power.  It  is  a  way  truly 
American.  It  gets  results. 


323 


CHAPTER  XV 

Fair  Price  Policies 

Policies  adopted  by  the  public  as  well  as  policies 
adopted  by  milk  producers,  manufacturers  and  dis- 
tributors will  largely  determine  the  fairness  of  the 
price  of  milk  both  to  producers  and  to  consumers. 
Let  us  therefore  restate  in  conclusion  those  policies 
reflected  through  these  pages  that,  adopted,  will 
tend  most  surely  to  protect  the  long  term  interests 
of  all. 

Those  policies  only  will  persist  that  are  based  on 
the  facts  of  the  industry.  Of  these  facts  the  follow- 
ing are  of  outstanding  importance  in  shaping  policies: 

(1)  Whole  milk  is  a  perishable  article,  for  which  a 
market  must  be  found  every  day  whether  it  be  manu- 
factured into  products,  the  price  for  which  is  deter- 
mined  by   national   and   international   forces,    or 
whether  it  be  sold  as  whole  milk. 

(2)  The  wholesomeness  of  milk  is  paramount  to 
its  food  value. 

(3)  Other  factors  being  equal,  the  unit  cost  of 
distributing  milk  decreases  as  volume  increases. 

(4)  Milk  contains  certain  properties  essential  to 
sound  nutrition. 

These  are  not  new  facts,  but  they  are  the  out- 
standing facts  around  which  policies  that  stay  must 
be  built. 

Whole  milk  is  perishable.  Just  because  whole 
324 


FAIR  PRICE  POLICIES 

milk  is  a  perishable  product  the  price  of  milk  to  the 
farmer  and  to  the  consumer  must  be  determined  by 
market  conditions;  that  is,  by  the  quantity  pro- 
ducers are  making  and  consumers  are  eating.  When 
prices  of  whole  milk  are  materially  above  the  price 
of  manufactured  milk  products,  any  increase  in 
normal  production  unaccompanied  by  a  similar 
increase  in  consumption,  soon  means  heavy  financial 
losses  to  the  dealer. 

With  uniform  employment  at  rising  wages,  a  much 
larger  quantity  of  milk  can  be  sold  at  higher  prices 
than  under  conditions  of  unemployment.  Weather 
conditions  peculiar  to  a  primary  market  will  materi- 
ally affect  either  the  production  or  consumption  of 
milk;  usually  decreasing  the  one  while  increasing 
the  other,  seldom  decreasing  or  increasing  both  in 
the  same  ratio. 

Within  any  given  primary  market  region  the  price 
on  whole  milk  must  be  uniform  in  order  to  keep  the 
flow  of  milk  into  usual  marketing  channels.  But 
as  between  the  larger  primary  raw  milk  markets 
there  must  be  monthly  variations  in  price  to  meet 
changing  local  producing  and  consuming  needs. 

Just  as  certainly  as  the  conditions  of  production 
and  consumption  in  each  primary  market  largely 
determine  the  price  of  whole  milk  when  that  price 
is  materially  beyond  the  value  of  manufactured  milk 
products,  so  the  value  of  these  manufactured  prod- 
ucts must  largely  determine  the  price  of  whole  milk 
when  substantially  more  milk  is  being  produced  than 
is  being  consumed.  In  both  periods,  of  course, 

325 


THE  PRICE   OF  MILK 

there  must  be  a  price  to  the  farmer  that  will  give 
him  his  production  costs  as  judged  by  his  alterna- 
tives; and  over  a  period  of  years,  the  production 
costs  and  consumption  figures  must  be  the  same; 
but  it  is  the  way  of  all  markets  that  these  two  forces 
for  any  one  day  or  for  any  one  month  or  for  any  one 
year  are  seldom  identical. 

The  first  plank  in  fair  price  policies  is  that  the 
price  of  milk  to  the  producer  is  determined  by 
market  conditions.  And  this  for  the  very  simple 
reason  that  the  alternatives  lie  with  the  farmer  on 
the  one  hand  and  with  the  consumer  on  the  other. 
The  farmer  can  produce,  the  consumer  can  eat,  more 
or  less  of  other  things.  And  this  "more-or-less" 
factor  it  is  that  in  the  final  analysis  determines  the 
price  of  milk. 

The  question  with  the  farmer  is  not  only  what 
he  is  making  on  milk  but  whether  he  can  make  more 
or  less  on  milk  than  on  other  things;  the  question 
with  the  consumer  is  whether  she  desires  to  choose 
more  or  less  milk  at  prevailing  prices  as  compared 
with  other  foods. 

We  ma;^chLJ^ 
worth 


are  noThi  the  toothless  age 

more  powerful  than  preachments  and  demand  some- 
thing todiew.  A  long  line  of  chewing  ancestors 
sets  the  upward  limit  to  the  amount  of  fluid  milk 
adults  will  consume,  even  though  it  is  the  one  per- 
fect food.  And  the  wise  old  farmers  that  make  the 
choice  as  to  whether  they  will  or  will  not  produce 

326 


FAIR  PRICE  POLICIES 

milk  cogitate  on  many  things  not  included  in  price 
formulas. 

The  law  of  supply  and  demand  is  not  a  juggernaut 
car  before  which  all  must  cast  themselves.  Both 
production  and  consumption  are  the  results  of  a 
complexity  of  forces,  all  of  which  are  subject  to 
social  control  within  limits  by  proper  means.  We 
can,  by  cooperative  action,  adopt  constructive  poli- 
cies that  will  protect  the  interests  of  both  producers 
and  consumers  of  milk.  Communities,  local  or 
national,  can  have  ideals  and  carry  them  out  just 
as  do  individuals. 

That  governmental  agencies  can  ever  "fix"  the 
price  to  be  paid  producers  for  milk  is  one  of  the 
ideas  that  ought  to  be  interned  for  all  time  to  come. 
Governmental  agencies  can  really  "fix"  prices  only 
where  production  and  consumption  are  both  known 
and  subject  to  complete  control.  This  happens  only 
when,  as  in  war  time,  government  becomes  the  chief 
purchaser,  or  when  there  is  a  monopoly  of  purchas- 
ing or  of  production,  or,  as  with  electric,  water,  or 
street  railway  companies,  of  distribution.  The 
spread  that  is  required  for  distributing  milk,  public 
agencies  may  determine;  that  is,  where  the  dis- 
tributing agencies  are  few  or  can  all  be  put  under 
the  same  control,  just  as  gas  and  electric  and  other 
public  utilities  have. 

But  price  fixing  can  never  be  effective  as  to  the 
price  the  farmer  must  take  for  his  milk.  For  over 
the  farmer's  choice  no  one  can  have  control.  Even 
as  to  the  distributor's  spread  governmental  powers 

327 


THE  PRICE  OF  MILK 

have  their  distinct  limits  in  that  the  alternatives  as 
to  where  and  how  men  use  their  capital  and  their 
abilities  rest  with  the  individuals.  In  this  field, 
therefore,  governmental  price  fixing  to  be  perma- 
nent or  economical  must  be  such  as  to  entice  capital 
and  adequately  reward  individual  merit. 

As  to  milk  prices  to  the  farmers,  all  parties  at 
interest  can  help  to  assure  a  price  that  will  maintain 
a  production  adequate  to  consumption  needs. 

Many  methods  can  be  used  to  broaden  the  market 
for  milk  so  as  to  maintain  a  price  that  stimulates 
production.  To  this  end 

(1)  Policies  that  favor  the  development  of  an 
export  trade  in  dairy  products  should  be  adopted 
and  maintained.    This  emphasizes  good  grades  and 
proper  packing 

(2)  The  facts  as  to  the  food  value  of  milk  as  com- 
pared with  other  foods  should  be  disseminated  by 
teachers,  by  consumers'  clubs,  by  physicians  and  by 
public  officials. 

(3)  Conditions  under  which  milk   is  produced, 
shipped  or  distributed  we  should  continue  to  improve, 
in  order  that  the  quality  of  milk  delivered  to  the 
consumer  may  be  such  as  to  keep  milk  both  a  tasty 
and  wholesome  food. 

(4)  The  nutrient  element  in  butter,  not  found  as 
a  rule  in  substitutes  for  butter,  should  be  made 
known  to  each  household  in  all  countries. 

(5)  Milk  producers  should  organize  to  protect 
their  price  and  further  economies  in  production  and 
transportation.     To  this  end  collective  bargaining 

328 


FAIR  PRICE  POLICIES 

by  milk  producers  should  not  be  prohibited  by  anti- 
trust statutes.  This  done  the  principle  of  arbitra- 
tion must  be  recognized. 

(6)  Prices  to  consumers  can  be  stabilized  by 
cooperation  between  producers  and  distributors  to 
the  end  that  the  habit  of  milk  consumption  may 
grow  to  the  betterment  of  the  health  of  the  consumer, 
the  market  for  the  producer  and  the  business  of  the 
milk  dealer.  Price  stabilization,  however,  does  not 
mean  price  uniformity  the  year  round  to  either  pro- 
ducer or  consumer. 

Other  factors  being  equal,  the  cost  of  distributing 
milk  per  quart  decreases  as  volume  increases.  Vol- 
ume, to  be  sure,  is  not  the  sole  determining  factor  in 
distributing  costs.  Many  concerns  of  small  volume 
will  have  lower  costs  than  concerns  with  larger 
volume.  But,  assuming  equal  competency  in  man- 
agement, equal  ability  in  getting  efficient  work  from 
laborers,  and  assuming  that  equipment  and  buildings 
are  used  to  capacity,  the  larger  the  volume  of  milk 
going  through  the  plant  and  the  larger  the  volume  of 
milk  on  the  retail  wagon,  the  lower  the  cost  per  quart. 

To  increase  the  spread  is  to  increase  the  number 
of  channels  through  which  milk  is  profitably  distrib- 
uted; and  it  is  only  by  decreasing  those  channels 
that  investments  can  be  assured  of  protection,  and 
total  net  profits  increased. 

It  is  sound  policy,  therefore,  to  encourage  volume 
in  plant  and  on  retail  wagons.  This  volume  can  be 
encouraged  and  maintained  by  the  following  prin- 
ciples: 

329 


THE  PRICE  OF  MILK 

(1)  The  retail  wagon  alone  is  the  economical 
method  of  distributing  milk. 

(2)  Cash  and  carry  plans  must  be  eliminated. 

(3)  Grocery  stores  should  carry  milk  as  an  accom- 
modation and  prices  should  reflect  this. 

(4)  Unnecessary  duplication  of  investment  both 
in  city  and  in  country  is  not  to  the  interest  of 
farmers,  consumers,  milk  dealers,  or  health  author- 
ities. 

(5)  The  ideal  is  one  retail  milk  wagon  only  on 
each  street. 

(6)  This   retail   wagon   should   deliver   milk   in 
sealed  containers,  kept  from  the  first  under  con- 
trolled and  refrigerated  conditions. 

One  plan  often  advocated  as  a  proper  solution  for 
the  milk  problem  misses  all  the  essential  points,  and 
that  is  the  plan  of  having  a  public  pasteurizing  plant, 
under  the  theory  that  any  small  dealer  can  get  his 
milk  pasteurized  at  the  same  cost  as  the  large  dealer, 
and  thus  assure  low  prices  through  competition. 

Is  each  dealer  to  have  his  own  bottles  under  this 
plan?  If  so,  is  the  dealer  with  the  smaller  number 
of  bottles  to  pay  more  per  unit  than  the  dealer  with 
a  larger  number  of  bottles?  The  cost  will  be  more. 
Is  bottling  to  be  done  separately  in  many  places 
where  there  can  be  no  adequate  inspection?  Is  there 
to  be  a  higher  price  to  the  consumer  for  those 
dealers  who  have  to  make  the  longer  hauls?  Is 
there  any  assurance  under  this  plan  that  many 
competitors  will  either  protect  the  purity  of  the  milk 
or  the  price? 

330 


FAIR  PRICE  POLICIES 

The  new  scientific  fact  that  there  are  elements  in 
milk  absolutely  essential  to  sound  nutrition,  quite 
'apart  from  its  chemical  f o(xT~value,  makeslnilk^dis- 
tribution  a  public  service,  and  of  every  milk  dis- 
tributor a  public  servant.  This  fact,  together  with 
the  other  human  elements  in  milk  distribution, 
emphasizes  another  plank  in  sound  public  policies: 
the  salient  facts  as  to  milk  distribution  should  be 
available  to  all;  facts  as  to  health,  facts  as  to 
investments,  facts  as  to  production  and  distribution 
costs.  Herein  lies  protection  to  investments,  free- 
dom from  criticism  of  the  uninformed,  a  stable 
market,  a  satisfied  clientele. 

Just  how  this  should  and  will  be  done  will  vary 
from  section  to  section.  It  augurs  well  for  the  future 
that  milk  dealers  themselves  have  been  the  first  to 
desire  just  such  publicity.  The  promoter  is  an 
unwelcome  visitor  to  the  average  milk  dealer,  for 
the  milk  dealer,  as  no  one  else,  knows  that  there  is 
something  peculiarly  repugnant  to  the  public  mind 
in  having  "water"  in  the  stock  of  milk  companies. 
Therefore,  the  milk  dealer  has  everything  to  gain 
and  nothing  to  lose  by  factual  publicity. 

Milk  distribution  is  essentially  a  quasi-public 
business.  The  law  and  the  facts  indicate  that  it 
will  be  made  so  unless  milk  distributors  keep  their 
business  on  a  high  plane  of  price  justice. 

American  consumers  are  fair  and  cordially  lend 
their  good  will  where  facts  show  their  treatment  to 
be  fair.  The  dealer  under  full  publicity  can  expect 
that  the  public  will  be  fair  with  him. 

331 


THE  PRICE  OF  MILK 

The  wholesomeness  of  milk  is  paramount  to  its 
food  value.  The  wholesomeness  of  the  milk  supply 
is  best  assured  through  bacterial,  sediment  and 
butter  fat  tests  of  the  product  as  delivered,  rather 
than  through  reliance  primarily  on  inspection  of 
dairy  herds  and  barns.  This  places  a  larger  responsi- 
bility on  the  milk  dealer.  A  sufficient  number  of 
inspectors  should  be  provided  to  aid  farmers  and 
dealers  in  producing  milk  that  is  wholesome  and  in 
keeping  it  so. 

Milk  varies  in  value  as  much  as  does  wheat  or 
corn  or  apples  or  other  commodities  for  which  grades 
have  been  established  by  law.  The  value  of  milk 
is  dependent  upon  butter  fat  content  and  on  purity. 
It  should  be  bought  and  sold,  therefore,  on  a  butter 
fat  basis.  The  grading  of  the  milk  purchased  from 
the  producer  is  done  when  it  is  bought  on  a  butter 
fat  basis.  Grades  of  milk,  including  a  grade  of 
standardized  milk,  should  be  legally  established  for 
sale  to  the  consumer. 

'In  short,  those  policies  are  sound  that  assure  a 
fair  bargain  as  to  price;  secure  a  milk  produced  and 
distributed  under  guidance  of  inspectors  to  insure 
its  purity;  cooled  promptly  on  the  farm  to  insure 
wholesomeness;  handled  through  machinery  that 
can  be  sterilized  that  the  milk  may  not  be  contam- 
inated; distributed  with  the  least  possible  duplica- 
tion of  labor  and  investment,  with  a  volume  in 
receiving  station,  in  plant  and  on  the  retail  wagon 
requisite  for  minimum  costs;  all  with  full  publicity 
of  cost  and  profit  facts. 

332 


INDEX 


Acid  test,  218. 

Advertising,  189,  257. 

American  Public  Health  Association,  202,  216. 

Anderson,  Professor,  108. 

Animal  fats.    See  Substitutes  for  butter. 

Anti-trust  statutes,  138-141. 

Arbitration  of  milk  prices,  320-323,  329. 

Australia,  22. 

Austria-Hungary,  85. 

Bacteria  standards,  218,  230-234. 

Balance  of  trade,  91.   See  Exports  and  imports. 

Baltimore,  66, 107, 157, 159, 185, 187, 196, 265, 
320. 

Berlin,  89. 

Bingham,  John,  259. 

Blended  milk,  United  States  standard  for,  232. 

Boston,  93,  185,  240,  242. 

Bottle  Exchange,  Baltimore,  273. 

Bottles:!  capping,  188;  exchanges,  290;  loss, 
188,  239;  washing,  188,  189,  211. 

Bottling,  188,  189,  199,  211,  271. 

Bowen,  John  T.,  209. 

Breed,  R.  S.t  203. 

Butter,  33,  36, 38,  39,  45, 47, 51,  60,  68-72,  89, 
90,  91;  adulteration,  193-194;  companies, 
130;  food  value  of,  305;  manufacture  of, 
130;  prices,  70,  71,  76,  77,  79-81,  82, 96-98; 
production  of,  51,  52,  74-76;  standards  for, 
223-234;  substitutes  for,  47,  74-82,  92, 
305;  value  of,  61.  (For  legal  standards  for 
butter  see  Legal  Standards  for  Dairy  Prod- 
ucts.) 

Butter  fat,  158. 

Buttermilk,  38,  39,  51;  powdered,  310; 
United  States  standard  for,  232. 

California,  166,  223. 

Calves,  37, 38, 39;  increase  in,  31;  slaughtered 
in  United  States  1914-1919,  31. 

Can  washing,  188. 

Canada,  85,  87,  88;  Milk  Committee,  259; 
milk  cows  in,  86. 

Casein,  36,  59. 

Cash  and  carry  plans,  236-244,  330. 

Charitable  organizations,  221,  242. 

Cheese,  36, 37, 38, 39, 45, 51, 52, 59, 60, 76, 89, 
90,  91;  cottage,  311;  factories,  98;  prices 
of,  68-72,  76,  79,  96-98;  production,  51, 
74-76;  substitutes  for,  92;  value  of,  61. 
(For  legal  standards  for  cheese  see  Legal 
Standards  for  Dairy  Products.) 

Chicago,  93,  94,  96,  97,  112,  113,  119,  120, 
123,  125,  152,  154,  155,  156,  185. 

Chicago  Milk  Commission,  118. 

Civil  service,  220. 

Cleveland,  88,  93,  107,  187;  price  to  pro- 
ducer, 252;  spread  to  distributor,  252. 


333 


Cold  storage,  66,  70-74;  plants,  130;  prices, 
78-80, 103. 

Colorado,  223. 

COLLECTIVE  BARGAINING,  SHOULD  DAIRYMEN 
ORGANIZE  FOR?  130-141. 

Collective  bargaining,  49,  130-141,  313-323, 
328r329. 

Coloring  agents,  199. 

Columbus,  237,  238;  spread  to  milk  dis- 
tributor, 253;  price  to  producer,  253. 

Commission  on  Milk  Standards,  198,  204,  206, 
222. 

Competition,  35,  137,  138;  butter,  46;  inter- 
national, 48,  66. 

Concentrated  milk,  232,  233. 

Condensed  milk,  36,  37,  39,  40,  51,  52,  59,  67, 
69,  77,  81,  89,  90,  91,  134,  233;  companies, 
131;  powders,  101;  production  of,  51; 
retail  price  of,  79.  (For  legal  standards  for 
condensed  milk  see  Standards  for  Dairy 
Products.) 

Condenseries,  134. 

Consumers  and  milk  prices,  313-323. 

Consumers'  interests,  protection  of,  148-159, 
324-333,  274-290. 

Consumption:  per  capita  of  butter,  74;  per 
capita  of  meat,  23;  milk,  15,  23. 

COOPERATION  AND  PRICE,  313-323. 

Cooperation  and  price,  148. 

Cooperative  sales  organizations,  165-172. 

Corn,  31,  33. 

Corn  oil,  76. 

Cost,  volumeand,  208,  210, 211,  251-273, 282, 
290,  329. 

Cost  of  producing  milk,  36,  48,  104-129. 

Cost  unit,  farm,  104. 

Cottonseed  oil,  76. 

Cows,  depreciation,  120. 

Cream,  58,  83. 

Cream  powders,  101. 

Creameries,  58,  98. 

Cottonseed  meal,  31,  33. 

Connecticut,  109. 

Dairy  areas:  United  States,  88,  89;  world's 
greatest,  85. 

Dairy  cattle  in  United  States,  93;  see  map 
facing  94. 

Dairy  costs,  efficiency  in,  127. 

Dairy  cows,  distribution  of,  in  United  States, 
85;  value,  24. 

Dairy  Division  of  the  United  States  Depart- 
ment of  Agriculture,  37,  90,  209. 

Dairy  farms:  licenses,  202-204,  212-222; 
wages  on,  120,  124. 

Dairy  organizations,  165-172. 

DAIRY  PRODUCTS,  LEGAL  STANDARDS  FOR, 
223-234. 


INDEX 


Dairy  products:  economical,  23;  exports  of, 
89,  93;  storage  of,  123;  receipts  from,  25; 
value  of,  51. 

Dairy  regions,  location  of,  85-88. 

Dairy  strikes,  H^HS. 

Dairymen's  organizations,  functions  of,  136; 
local  143. 

Daylight  delivery,  151. 

Delivery  expense,  188,  189.    See  Distribution. 

Denmark,  87. 

Depreciation,  120,  189,  190. 

Detroit,  93. 

Dipped  milk,  236-250. 

Diseases,  milk-borne,  194,  200-212. 

DISTRIBUTED,  How  SHALL  MILK  BE?  235-250. 

DISTRIBUTION,  CAN  MILK  COSTS,  BE  LOW- 
ERED? 251-273. 

DISTRIBUTION,  THE  COST  OF  MILK,  175-192. 

DISTRIBUTION,  THE  PUBLIC  INTEREST  IN,  274- 
290. 

Distribution:  costs  of.  16,  244,  251-273,  329- 
331;  dairy  cows  in  United  States,  85; 
economies  in  volume  of  milk,  208;  public 
regulation  of,  274-290. 

Distributor,  198. 

Dried  milk,  233,  309. 

Dried  cream,  309. 

Educational  campaigns,  40-42,  328-329. 

Efficiency  in  dairy  costs,  127. 

England,  21. 

Erdman,  H.  E..  236. 

Evaporated  milk,  52,  67,  69,  77,  81,  134,  232; 

sweetened,  233. 

Expenditure  f9r  milk  and  meat,  22. 
Exports  of  dairy  products,  67,  78,  81,  89-91, 

93. 

Europe,  85;  milk  cows  in,  map  facing  86- 
Ewe's  milk,  United  States  standard,  232. 

Factors  in  production,  122.    See  Formula. 
Factory  butter,   United   States,    132.     See 

Butter. 

Family  budgets,  22. 

Farmers,  prices  to,  110.    See  Producers. 
Farms:   inspection  of,  200  ff.;   labor  on,  33; 

live  stock  on,  29;  wages,  117. 
Fats,  production,  75.    See  Butter. 
Feed  consumed  per  cow,  127.    See  Formula. 
Field  method,  10^107. 
Food  Administration:  milk  commissions,  111; 

Pennsylvania,  40,  213,  221;    260;    United 

States,  162. 

Food  habits,  racial,  35,  41. 
Food  Law,  United  States  Pure,  194.     See 

Legal  standards. 
Food  sources,  22. 
FOOD  VALUE  OP  WHOLESOME  MILK,  THE, 

293-312. 

Food  values,  comparative,  19. 
Food  value  of  milk,  relative,  44. 
Formula  method,  the,  108-129,  159-165.    See 

Cost  of  production. 
France,  85,  87,  88. 
Freight,  189. 
Functions  of  dairymen's  organizations,  136. 


Gardiner,  Asa  B.,  265. 

Germany,  21,  85,  87. 

Goat's  milk,  United  States  standard,  232. 

Good-will,  289. 

Grades  of  milk,  221-222. 

Great  Britain,  87,  88.    See  United  Kingdom. 

Greece,  88. 

Grocery  stores  as  milk  depots,  235-250, 330. 

Harding,  H.  A.,  203,  215. 

Haskins  and  Sells,  183. 

Hauling:  city,  176;  cost  of,  175. 

Hay,  31,  33.    See  Formula. 

Homogenized  milk,  United  States  standard, 

232.    See  Remade  milk. 
Hoover,  Herbert,  20,  109,  121,  160,  183,  307. 
Hog  price  formula,  Hoover,  160. 

Ice  cream,  36,  37,  38,  39,  45,  58,  59,  82,  189; 

storage  products  in,  83-85;  101-102.     (For 

legal  standards  for  ice  cream  see  Legal 

Standards  for  Dairy  Products.) 
Illinois,  26,  85,  185. 
Imports,  67,  76,  91,  92. 
Indiana,  121,  185,  223. 
Inspectors:    qualifications  of,   212;    salaries 

paid  to,  219. 
International  Association  of  Dairy  and  Milk 

Inspectors,  220. 
International  trade,  20.    See  Balance  of  trade, 

Exports,  Imports. 
Investments:  protection  to,  331;  unnecessary 

duplication  of,  289,  330. 
Iowa,  26,  223. 
Italy,  85,  87,  88,  89. 

Kelly,  Ernest,  219. 

Labor,  hours  of,  127. 

Lamb,  Judge  W.  E.,  112,  116. 

Law  of  supply  and  demand,  36,  327.     See 

Supply. 
Live  stock,  number  on  farms,  29. 

Malted  milk,  52,  234. 

Management  in  milk  plants,  181-188. 

Manufactured  milk  products,  price  of,  45,  325. 

Market  for  milk,  the,  328.  See  Law  of  supply 
and  demand;  Competition. 

Market  price,  65. 

MARKETS,  THE  PRICE  INTERDEPENDENCE  or 
LOCAL,  PRIMARY  AND  INTERNATIONAL,  85- 
103. 

Maryland,  223. 

Massachusetts,  109. 

McCollum,  Professor,  E.  V.,  16,  41,  274,  293, 
294,  295,  303,  305,  306,  307,  311. 

McKee,  J.  M.,  127. 

Meat,  per  capita  consumption  of,  23;  produc- 
tion of,  30. 

Mendenhall,  Dorothy  R.,  297. 

Michigan,  109,  121,  223. 

MILK,  THE  FOOD  VALUE  or  WHOLESOME, 
293-312. 


334 


INDEX 


Milk:  as  an  animal  food,  47;  bottled,  205; 
cheap  as  a  food,  18;  chemical  composition 
of,  300;  consumption  of,  37,  38,  39,  44,  53, 
54,  65;  cooling  of,  175;  estimated  produc- 
tion of,  30;  grades,  332;  protective  food 
value,  17,  18,  149,  274-290,  293-312,  331; 
qualities  needed  in,  218;  regularity  in  con- 
sumption, 239-242;  relative  price  of,  18, 
302;  remade,  55  (see  Remade  milk);  stand- 
ardization of,  195,  232;  surplus  and  price, 
53-60;  uses,  37.  (For  legal  standards  for 
milk  see  Legal  Standards  for  Dairy  Products.) 

Milk-borne  diseases,  200-212. 

Milk  bottles,  loss  on,  272-273  see  Bottles. 

Milk  Commission,  255-288. 

Milk  Commission:  Chicago,  118;  New  York 
Federal,  178. 

Milk  Commissions,  Food  Administration,  111. 

Milk  Committee,  New  York,  198. 

Milk  consumption,  standard  for,  15,  16,  312. 

Milk  cows:  Canada,  86;  Europe,  map  facing 
86;  number  of,  28;  United  States,  27. 

Milk  distribution  as  a  quasi-public  business, 
274-290,  332. 

Milk  distribution  costs,  251-273. 

Milk  distributors,  buying  power  of,  36.  See 
Distributor. 

Milk  drivers'  wages,  267. 

Milk  inspectors,  standards  for,  219.  See 
Inspectors. 

Milk  manufacturers,  buying  power  of,  36. 

Milk  plants,  wages  in,  90. 

Milk  powders,  36,  82,  99,  100,  101,  253.  See 
Dried  milk;  Remade  milk. 

Milk  producers,  price  received  by,  152-159, 
252-256. 

Milk  solids,  39. 

Milk  sugar,  52,  302,  310. 

Milwaukee,  185. 

Minnesota,  26,  109,  223. 

Monopoly,  135.    See  Quasi-public. 


National  Commission  on  Milk  Standards,  308. 

National  price  fixing,  144. 

Nebraska,  223. 

Netherlands,  87.  ' 

New  England,  185;  Milk  Producers'  Associa- 
tion, 159. 

New  Jersey,  109. 

New  York  City,  26,  60,  78,  87,  94,  96,  97, 109, 
119,  123,  152,  154,  155,  156,  177-180,  182, 
185,  216,  236,  238,  242,  243,  244,  245,  251, 
260,  265;  spread  of  distributor,  179.  See 
Distributor;  Spread. 

New  York  Federal  Milk  Commission,  178. 

New  York  Milk  Committee,  198. 

New  Zealand,  22. 

North,  Charles  E.,  182. 


Ohio,  26,  88,  94,  185,  237. 

Oil,  production,  75.    See  Butter  substitutes. 

Oklahoma,  223. 

Oleomargarin,  46,  76,  305;  price  of,  47;  pro- 
duction of,  47,  75-79.  See  Butter  sub- 
stitutes. 


Oregon,  223. 

ORGANIZATIONS,  POLICIES  OF  DAIRYMEN'S,  IN 

THEIR  RELATION  TO  PRICE,  142-172. 
Ottawa,  Canada,  265. 

Pasteurization,  189,  202,  202-219;  cost  of, 
208,  209;  states  and  cities  requiring,  223- 
234;  United  States  standards,  232. 

Pasteurization  plant,  public,  330. 

Peanut  oil,  76.    See  Butter  substitutes. 

Pearson,  F.  A.,  108,  112,  121,  124. 

Pennsylvania,  26,  260. 

Philadelphia,  56,  66,  93,  94,  97,  152,  153,  15i 
155,  156,  157,  158,  180,  185,  237,  242,  245, 
251,  265,  320;  consumption  of  milk  in,  44; 
distribution  costs  in,  184-188;  retail  prices 
in,  252;  spread  in,  181,  182;  wages,  43. 

Pittsburgh,  88,  93,  152,  154,  155,  156,  159, 
185, 242, 320;  distribution  costs  in,  253-257; 
price  conferences  in,  320;  producers'  price, 
254. 

Platform  expense,  189. 

POLICIES  OP  DAIRYMEN'S  ORGANIZATIONS  IN 
THEIR  RELATION  TO  PRICE,  142-172. 

Powdered  cream,  52. 

Powdered  milk,  52,  151.  See  Dried  milk; 
Remade  milk. 

Powdered  skim  milk,  52. 

Power,  188.    See  Spread. 

PRICE,  COOPERATION  AND,  313,  323. 

PRICE,  MANUFACTURED  MILK  PRODUCTS  IN 
THEIR  RELATION  TO,  51-84. 

PRICE  OF  MILK,  THE  FORCES  THAT  Fix  THE, 
35-50.  See  Producers. 

PRICE  OF  MILK,  THE  PUBLIC  INTEREST  IN  THE, 
15-34. 

PRICE  POLICIES,  FAIR,  324-333. 

PRICE,  POLICIES  OF  DAIRYMEN'S  ORGANIZA- 
TIONS IN  THEIR  RELATION  TO,  142-172. 

PRICE,  SANITARY  REQUIREMENTS  IN  THEIR 
RELATION  TO,  193-222. 

Price  conferences,  319. 

Price  fixing:  formula  method,  159-165;  see 
Formula;  national,  144. 

Prices:  consumers',  313-323;  living  standards 
and,  93;  market,  65,  94;  pasteurization  and, 
208-210;  producers',  110, 152-154, 252,  253; 
relation  of.  to  storage  stocks,  79;  relative 
256-258;  stabilization  of,  149, 329;  surplus 
plans,  157;  volume  and,  257. 

Primary  market,  94,  111,  325. 

Producer:  advantage  to,  of  public  regulation 
of  milk  distribution,  287-288;  prices,  110, 
152-154,  252,  253. 

PRODUCTION,  THE  COST  OF,  104-129. 

Production:  butter,  51,  76;  cheese,  51,  76; 
cpndensed  milk,  51;  meat,  30;  milk,  30; 
oils,  75;  wool,  30. 

PRODUCTION,  DISTRIBUTION  AND  FOOD  VALUE 
OP  MILK,  183. 

Proteins,  19.    See  Food  value  of  milk. 

PUBLIC  INTEREST,  THE,  IN  MILK  DISTRIBU- 
TION, 274-290. 

PUBLIC  INTEREST,  THE,  IN  THE  PRICE  OF 
MILK,  15-34. 

Public  regulation,  demand  for,  274-290. 


335 


INDEX 


Qualifications,  inspectors',  212. 
Qualities  needed  in  milk,  218. 
Quasi-public,  milk  distribution  as,  274-290. 

Rasmussen,  Professor  Fred,  108. 

Receipts  from  dairy  products,  26. 

Receiving  stations,  53,  54,  134,  135,  175,  218; 

declining  unit  costs  with  increasing  volume 

in,  268-270;    costs,   184,  187,   190.     See 

Distribution. 

Recipes  for  use  of  milk,  40-42. 
Recombined  milk,  308.    See  Remade  milk. 
Reconstituted  milk,  308.    See  Remade  milk. 
Redfield,  H.  W.,  203. 
Refrigeration,  188. 
Remade  milk,  55,  99,  151,  248,  308.     See 

Dried  milk;  Powdered  milk. 
Retail  milk  store,  235-250. 
Retail  wagon,  230-250.    See  Distribution. 
Rochester,  N.  Y.,  258. 
Rose,  Dr.  Flora,  301,  303. 
Rupert,  Ethel,  43. 

Salaries  paid  to  inspectors,  219. 

Sales  of  dairy  products,  26. 

San  Francisco,  93,  97. 

Sanitarians,  216. 

SANITARY  REQUIREMENTS  IN  THEIR  RELATION 
TO  PRICE,  193-222. 

Sanitary  requirements,  cost  of,  211-212. 

Scurvy,  206. 

Seattle,  93,  94. 

Sediment  tests,  218. 

Selling  expense,  189.    See  Distribution. 

Shipping  facilities,  137. 

Skim  milk,  38,  39,  45,  52,  59,  60,  62,  84,  158, 
194,  310;  powders,  101;  see  Remade  milk; 
standard,  232.  (For  legal  standards  for 
ekim  milk  see  Legal  Standards  for  Dairy 
Products.) 

Soil  fertility,  25. 

Spread:  defined,  177;  to  New  York  distribu- 
tor, 179;  to  Cleveland  distributor,  252;  to 
Columbus  distributor,  253;  to  Philadelphia 
distributor,  181,  182,  184-188.  See  Dis- 
tribution. 

Springfield,  Mass.,  242. 

Standardization  of  milk,  195-199. 

STANDARDS,  LEGAL,  FOR  DAIRY  PRODUCTS, 
223-234. 

Standards:  bacteria,  230-234;  Commission 
on  Milk,  198;  for  dairy  products,  legal, 
223-234.  See  Sanitary. 


Standards  of  living,  93. 

Sterilized  milk,  United  States  standard,  232. 

Storage  products,  70-75,  78-80,  123;   in  ice 

i-'  cream,  83-85.    See  Cold  storage. 

Strike,  dairy,  146-148. 

Supply  and  demand,  law  of,  30,  136,  313-323. 

See  Law. 
Surplus,  53,  56. 

Surplus  milk,  166,  187;  price  plans,  66,  157. 
Sweden,  85. 

Taylor,  Professor,  H.  C.,  108. 
Tests:  acid,  218;  fat,  176;  sediment,  218. 
Transportation:     charges,    37;     costs,    176; 
facilities,  36. 

Unfair  trade  practices,  273. 

United  Kingdom,  85.    See  Great  Britain. 

United  States:  calves  slaughtered  in,  1914- 
1919,  31;  dairy  areas,  88,  89;  dairy  cattle 
in  93  (see  map  facing  p.  94);  Department  of 
Agriculture,  26,  29,  37,  90,  209,  218,  223; 
distribution  of  dairy  cows  in,  85;  factory 
butter  in,  132;  Food  Administration,  162; 
milk  cows  in,  27;  production  of  milk,  28; 
pure  food  law,  194. 

Value,  dairy  cows,  24. 
Vegetable  oils,  75.    See  Butter  substitutes. 
Vermont,  87,  88,  94. 
Vitamines,  293-312. 

Volume  and  cost,  208,  210-211,  251-273,  282, 
290,  329. 

Wages:    dairy,   120,  124;    milk  plant,   190; 

Philadelphia,  43. 
Wage  earner,  standards,  20. 
Warren,  G.  F.,  108,  119,  121. 
Washington,  D.  C.,  107,  185,  187,  212,  213- 

215. 

Whey,  39,  52,  60,  62,  63. 
Wilkes-Barre,  242. 
Williams,  John  R.,  258. 
Wisconsin,  26,  85. 

Women's  Clubs  of  Western  Pennsylvania,  322. 
Wool,  estimated  production  of,  30. 
Woolman,  Henry  N.,  193. 

Zone  delivery  system,  257-262.  See  Quasi- 
public. 


336 


14  DAY  USE 

RETURN  TO  DESK  FROM  WHICH  BORROWED 

LOAN  DEPT. 

This  book  is  due  on  the  last  date  stamped  below,  or 

on  the  date  to  which  renewed. 
Renewed  books  are  subject  to  immediate  recall. 


LD  21A-50m-ll,'62 
(D3279slO)476B 


General  Library 

University  of  California 

Berkeley 


UNIVERSITY  OF  CALIFORNIA  LIBRARY 


